IDT Corp: Form 10-Q for the period ended Oct 31, 2024

The following information should be read in conjunction with the accompanying 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 our Annual Report on Form 10-K for the fiscal year ended July 31, 2024 (or the 2024 Form 10-K) as filed with the U.S. 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 our 2024 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 our 2024 Form 10-K.

Recently Issued Accounting Standards Not Yet Adopted

In November 2024, the Financial Accounting Standards Board, or FASB, issued Accounting Standards Update, or ASU, No. 2024-03, Income Statement-Reporting Comprehensive Income-Expense Disaggregation Disclosures (Subtopic 220-40), to improve the disclosures about an entity’s expenses including more detailed information about the types of expenses in commonly presented expense captions. At each interim and annual reporting period, entities will disclose in tabular format disaggregating information about prescribed categories underlying relevant income statement captions, as well as the total amount of selling expense and a description of the composition of its selling expense. We will adopt the amendments in this ASU for our fiscal year beginning on August 1, 2027. We are evaluating the impact that this ASU will have on our consolidated financial statements.

In December 2023, the FASB issued ASU No. 2023-09, Income Taxes (Topic 740), Improvements to Income Tax Disclosures, primarily related to the rate reconciliation and income taxes paid disclosures as well as certain other amendments to income tax disclosures. Entities will be required on an annual basis to consistently categorize and provide greater disaggregation of rate reconciliation information and further disaggregate their income taxes paid. We will adopt the amendments in this ASU for our fiscal year beginning on August 1, 2025. The amendments in this ASU should be applied on a prospective basis, although retrospective application is permitted. We are evaluating the impact that this ASU will have on our consolidated financial statements.

In December 2023, the FASB issued ASU No. 2023-08, Intangibles-Goodwill and Other-Crypto Assets (Subtopic 350-60), Accounting for and Disclosure of Crypto Assets, that changes the accounting for crypto assets from a cost-less-impairment model to fair value, with changes recognized in net income each reporting period. The ASU also requires enhanced disclosures including, among other things, the name, cost basis, fair value, and number of units for each significant holding, and a rollforward of annual activity including additions, dispositions, gains, and losses. We will adopt the amendments in this ASU for our fiscal year beginning on August 1, 2025. The ASU requires a cumulative-effect adjustment to the opening balance of retained earnings as of adoption. We are evaluating the impact that this ASU will have 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 October 31, 2024, 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 81.5% of the outstanding shares of National Retail Solutions, or NRS. On a fully diluted basis assuming all the vesting criteria related to various rights granted have been met, we would own 90.3% of the equity of net2phone 2.0 and 79.3% of NRS.

Reclassification

From and after February 1, 2024, we reclassified most of our technology and development expenses from “Selling, general and administrative” expense to a new “Technology and development” expense caption in the consolidated statements of income and reclassified an amount that was immaterial in all periods to “Direct cost of revenues.” The following table shows the amounts that were reclassified in the three months ended October 31, 2023 to conform to the current period’s presentation:

(in millions)

22

Explanation of Performance Metrics

Our results of operations discussion include the following performance metrics:

• for NRS, active point-of-sale, or POS, terminals, payment processing accounts, and recurring revenue,
• for net2phone, seats and subscription revenue, and
• for Traditional Communications, minutes of use.

NRS uses two key 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. NRS’ recurring revenue is NRS’ revenue in accordance with accounting principles generally accepted in the United States of America, or U.S. GAAP, excluding its revenue from POS terminal sales.

net2phone’s cloud communications offerings are priced on a per-seat basis, with customers paying based on the number of users in their organization. net2phone’s subscription revenue is its revenue in accordance with U.S. GAAP excluding its equipment revenue and revenue generated by a legacy SIP trunking offering in Brazil.

The trends and comparisons between periods for the number of active POS terminals, payment processing accounts, seats served, recurring revenue, and subscription revenue are used in the analysis of NRS’ or net2phone’s revenues and direct cost of revenues and are strong indications of the top-line growth and performance of the business.

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 and direct cost of revenues.

Three Months Ended October 31, 2024 Compared to Three Months Ended October 31, 2023

National Retail Solutions Segment

NRS, which represented 9.8% and 8.0% of our total revenues in the three months ended October 31, 2024 and 2023, respectively, is an operator of a nationwide POS network providing independent retailers with store management software, electronic payment processing, and other ancillary merchant services. NRS’ POS platform provides marketers with digital out-of-home advertising and transaction data.

(in millions)

(in thousands)

23

Revenues. Revenues increased in the three months ended October 31, 2024 compared to the similar period in fiscal 2024 driven primarily by revenue growth from NRS’ merchant services, as well as the expansion of NRS’ POS network.

Direct Cost of Revenues. Direct cost of revenues decreased in the three months ended October 31, 2024 compared to the similar period in fiscal 2024 primarily due to the decrease in the direct costs of NRS’ POS terminal sales.

Selling, General and Administrative. Selling, general and administrative expense increased in the three months ended October 31, 2024 compared to the similar period in fiscal 2024 primarily due to increases in sales commissions, employee compensation, legal fees, marketing expense, and bad debt expense. As a percentage of NRS’ revenue, NRS’ selling, general and administrative expense increased to 62.6% from 56.7% in the three months ended October 31, 2024 and 2023, respectively.

Technology and Development. Technology and development expense increased in the three months ended October 31, 2024 compared to the similar period in fiscal 2024 primarily due to increases in employee compensation and depreciation and amortization expense, partially offset by a decrease in consulting expense.

Fintech Segment

Fintech, which represented 12.0% and 8.8% of our total revenues in the three months ended October 31, 2024 and 2023, respectively, is comprised of: (i) BOSS Money, a provider of international money remittance and related value/payment transfer services; and (ii) other, significantly smaller, financial services businesses, including a variable interest entity, or VIE, that processes disbursement payments, and IDT Financial Services Limited, or IDT Financial Services, our Gibraltar-based bank.

(in millions)

Revenues. Revenues from BOSS Money increased in the three months ended October 31, 2024 compared to the similar period in fiscal 2024 primarily because of increased transaction volume in BOSS Money’s digital and retail channels. BOSS Money continues to benefit from cross-marketing to BOSS Revolution customers and the expansion of its retail agent network.

Direct Cost of Revenues. Direct cost of revenues increased in the three months ended October 31, 2024 compared to the similar period in fiscal 2024 primarily due to an increase in BOSS Money’s direct cost of revenues, which reflected the increase in BOSS Money’s revenue.

Selling, General and Administrative. Selling, general and administrative expense increased in the three months ended October 31, 2024 compared to the similar period in fiscal 2024 primarily due to increases in debit and credit card processing charges, employee compensation, and bank fees. The increase in card processing charges was the result of increased credit and debit card transactions through our BOSS Money app and other digital channels. As a percentage of Fintech’s revenue, Fintech’s selling, general and administrative expense decreased to 43.3% from 53.3% in the three months ended October 31, 2024 and 2023, respectively.

Technology and Development. Technology and development expense increased in the three months ended October 31, 2024 compared to the similar period in fiscal 2024 primarily due to an increase in depreciation and amortization expense, partially offset by a decrease in employee compensation.

net2phone Segment

The net2phone segment, which represented 7.0% and 6.6% of our total revenues in the three months ended October 31, 2024 and 2023, respectively, is comprised of net2phone’s integrated cloud communications and contact center services.

(in millions)

nm—not meaningful

(in thousands)

Revenues. net2phone’s revenues increased in the three months ended October 31, 2024 compared to the similar period in fiscal 2024 driven primarily by the growth in subscription revenue primarily in the U.S. and Mexico, which reflected the increase in seats served at October 31, 2024 compared to October 31, 2023.

Direct Cost of Revenues. Direct cost of revenues increased in the three months ended October 31, 2024 compared to the similar period in fiscal 2024 primarily due to the increase in revenues, with the largest increase in the U.S. market. net2phone’s focus on mid-sized businesses, multi-channel strategies, and localized offerings generated revenue growth that exceeded the increase in direct cost of revenues.

Selling, General and Administrative. Selling, general and administrative expense decreased in the three months ended October 31, 2024 compared to the similar period in fiscal 2024 primarily due to decreases in marketing expense, employee compensation, and consulting expense, partially offset by an increase in sales commissions. As a percentage of net2phone’s revenues, net2phone’s selling, general and administrative expense decreased to 60.8% from 66.6% in the three months ended October 31, 2024 and 2023, respectively.

Technology and Development. Technology and development expense increased in the three months ended October 31, 2024 compared to the similar period in fiscal 2024 primarily due to an increase in employee compensation.

Traditional Communications Segment

The Traditional Communications segment, which represented 71.2% and 76.6% of our total revenues in the three months ended October 31, 2024 and 2023, respectively, includes: (i) IDT Digital Payments, which enables customers to transfer airtime and bundles of airtime, messaging, and data to international and domestic mobile accounts; (ii) BOSS Revolution, an international long-distance calling service marketed primarily to immigrant communities in the United States and Canada; and (iii) IDT Global, a wholesale provider of international voice and SMS termination and outsourced traffic management solutions to telecoms worldwide. Traditional Communications also includes other small businesses and offerings including early-stage business initiatives and mature businesses in harvest mode.

Traditional Communications’ most significant revenue streams are from IDT Digital Payments, BOSS Revolution, and IDT Global. IDT Digital Payments and BOSS Revolution are sold directly to consumers and through distributors and retailers. We receive payments for BOSS Revolution, traditional calling cards, and IDT Digital Payments prior to providing the services. We recognize the revenue when services are provided to the customer. Traditional Communications’ revenues tend to be somewhat seasonal, with the second fiscal quarter (which contains Christmas and New Year’s Day) and the fourth fiscal quarter (which contains Mother’s Day and Father’s Day) typically showing higher minute volumes.

(in millions)

Revenues. Revenues from IDT Digital Payments increased in the three months ended October 31, 2024 compared to the similar period in fiscal 2024 primarily due to increases in revenues from the direct-to-consumer and enterprise and wholesale channels, partially offset by a decrease in revenues from the retail channel.

Revenues and minutes of use from BOSS Revolution decreased in the three months ended October 31, 2024 compared to the similar period in fiscal 2024. BOSS Revolution continues to be impacted by persistent, market-wide trends, including the proliferation of unlimited calling plans offered by wireless carriers and mobile virtual network operators, and the increasing penetration of free and paid over-the-top voice, video conferencing, and messaging services.

Revenues from IDT Global slightly increased in the three months ended October 31, 2024 compared to the similar period in fiscal 2024. Minutes of use from IDT Global slightly decreased in the three months ended October 31, 2024 compared to the similar period in fiscal 2024. IDT Global’s revenues and minutes of use generally decline each fiscal quarter as communications globally continue to transition away from international voice calling. This trend was accelerated by the impact of COVID-19 as business communications shifted from calling to video conferencing and other collaboration platforms. We expect that IDT Global will continue to be adversely impacted by these trends, and minutes of use and revenues will likely continue to decline from quarter-to-quarter, as we seek to maximize economics rather than necessarily sustain minutes of use or revenues.

Direct Cost of Revenues. Direct cost of revenues decreased in the three months ended October 31, 2024 compared to the similar period in fiscal 2024 primarily due to the decrease in BOSS Revolution’s minutes of use and direct cost of revenues.

Selling, General and Administrative. Selling, general and administrative expense decreased in the three months ended October 31, 2024 compared to the similar period in fiscal 2024 primarily due to decreases in sales commissions and employee compensation, partially offset by increases in marketing expense and stock-based compensation. As a percentage of Traditional Communications’ revenue, Traditional Communications’ selling, general and administrative expense increased to 9.1% from 8.9% in the three months ended October 31, 2024 and 2023, respectively.

Technology and Development. Technology and development expense decreased in the three months ended October 31, 2024 compared to the similar period in fiscal 2024 primarily due to decreases in depreciation and amortization expense, employee compensation, and software license and maintenance expense.

Severance Expense. In the three months ended October 31, 2024 and 2023, Traditional Communications incurred severance expense of $0.2 million and $0.5 million, respectively.

Corporate

(in millions)

Corporate costs mainly include compensation, consulting fees, treasury, tax and accounting services, human resources, corporate purchasing, corporate governance including Board of Directors’ fees, internal and external audit, investor relations, corporate insurance, corporate legal, and other corporate-related general and administrative expenses. Corporate does not generate any revenues, nor does it incur any direct cost of revenues.

General and Administrative. Corporate general and administrative expense increased in the three months ended October 31, 2024 compared to the similar period in fiscal 2024 primarily because of an increase in audit and accounting fees, partially offset by a decrease in employee compensation. As a percentage of our consolidated revenues, Corporate general and administrative expense was 0.9% in both the three months ended October 31, 2024 and 2023.

Other Operating Gain, net. As discussed in Note 16 to the Consolidated Financial Statements included in Item 1 to Part I of this Quarterly Report, we (as well as other defendants) were named in a class action on behalf of the stockholders of our former subsidiary, Straight Path Communications Inc., or Straight Path. We incurred legal fees of nil and $0.2 million in the three months ended October 31, 2024 and 2023, respectively, related to this action. Also, we recorded offsetting gains from insurance claims for this matter of nil and $0.7 million in the three months ended October 31, 2024 and 2023, respectively. In fiscal 2024, we received the final payment from our insurance policy for these claims. On October 3, 2023, the Court of Chancery of the State of Delaware dismissed all claims against us, and found that, contrary to the plaintiffs’ allegations, the class suffered no damages. The plaintiffs will have 30 days from entry of the final order to file an appeal.

Consolidated

The following is a discussion of our consolidated stock-based compensation expense, and our consolidated income and expense line items below income from operations.

Stock-Based Compensation Expense. Total stock-based compensation expense included in consolidated selling, general and administrative expense and technology and development expense was $0.9 million and $0.8 million in the three months ended October 31, 2024 and 2023, respectively. The increase in stock-based compensation expense was primarily due to certain equity grants to Bill Pereira, our President and Chief Operating Officer, in the second quarter of fiscal 2024, including a contingent bonus subject to the completion of certain financial milestones that may be paid, at Mr. Pereira’s option, in either shares of our Class B common stock or cash. The increase in stock-based compensation expense was partially offset by a decrease in stock-based compensation expense from the grant of deferred stock units, or DSUs, that, upon vesting, will entitle the grantees to receive shares of our Class B common stock. As of October 31, 2024, there was $1.0 million of total unrecognized compensation cost related to non-vested DSUs, which is being recognized on a graded vesting basis over the requisite service periods that end in October 2027.

Effective as of June 30, 2022, restricted shares of NRS’ Class B common stock were granted to certain NRS employees. The restrictions on the shares lapse in three installments, the first was on June 1, 2024, and the others are June 1, 2026 and June 1, 2027. As of October 31, 2024, unrecognized compensation cost related to NRS’ non-vested Class B common stock was an aggregate of $1.8 million. The unrecognized compensation cost is expected to be recognized over the remaining vesting period that ends in fiscal 2027.

As of October 31, 2024, there was an aggregate of $0.8 million in unrecognized compensation cost related to non-vested stock options and restricted stock, which is expected to be recognized over the remaining vesting periods that end in fiscal 2028.

(in millions)

27

Other Expense, net. Other expense, net consists of the following:

(in millions)

We have an investment in shares of convertible preferred stock of a communications company (the equity method investee, or EMI). As of October 31, 2024 and 2023, our ownership was 33.4% and 33.3%, respectively, of the EMI’s outstanding shares on an as converted basis. We account for this investment using the equity method since we can exercise significant influence over the operating and financial policies of the EMI but do not have a controlling interest. We determined that on the dates of the acquisitions of the EMI’s shares, there were differences between our investment in the EMI and our proportional interest in the equity of the EMI of an aggregate of $8.2 million, which represented the share of the EMI’s customer list on the dates of the acquisitions attributed to our interest in the EMI. These basis differences are being amortized over the 6-year estimated life of the customer list. “Equity in the net loss of investee” includes the amortization of equity method basis difference.

Provision for Income Taxes. The change in income tax expense in the three months ended October 31, 2024 compared to the similar period in fiscal 2024 was primarily due to differences in the amount of taxable income earned in the various taxing jurisdictions.

Net Income Attributable to Noncontrolling Interests. The change in the net income attributable to noncontrolling interests in the three months ended October 31, 2024 compared to the similar period in fiscal 2024 was primarily due to increases in net income attributable to the noncontrolling interests in net2phone 2.0, NRS, and the VIE, partially offset by a decrease in net income attributable to the noncontrolling interests in Sochitel.

Liquidity and Capital Resources

As of the date of this Quarterly Report, we expect our cash flow from operations and the balance of cash, cash equivalents, debt securities, and current equity investments that we held on October 31, 2024 will be sufficient to meet our currently anticipated working capital and capital expenditure requirements during the twelve-month period ending October 31, 2025.

At October 31, 2024, we had cash, cash equivalents, debt securities, and current equity investments of $180.4 million and working capital (current assets in excess of current liabilities) of $161.9 million.

Contractual Obligations and Commitments

The following table includes our anticipated material cash requirements from contractual obligations and other commitments at October 31, 2024:

(1) The above table does not include up to $10 million for the potential redemption of shares of NRS’ Class B common stock, an aggregate of $33.2 million in performance bonds, and up to $3.0 million for potential contingent consideration payments related to a business acquisition, due to the uncertainty of the amount and/or timing of any such payments.

28

Consolidated Financial Condition

(in millions)

Operating Activities

Our cash flow from operations varies significantly from quarter to quarter and from year to year, depending on our operating results and the timing of operating cash receipts and payments, generally trade accounts receivable and trade accounts payable. The decrease in net cash provided by operating activities to $0.2 million from $14.8 million in the three months ended October 31, 2024 and 2023, respectively, predominantly reflects the timing of our payments to cover anticipated BOSS Money disbursement prefunding.

Gross trade accounts receivable decreased to $48.2 million at October 31, 2024 from $48.6 million at July 31, 2024 primarily due to collections in the three months ended October 31, 2024 that were greater than amounts billed during the period, as well as from changes in foreign currency exchange rates.

Deferred revenue arises from sales of prepaid products and varies from period to period depending on the mix and the timing of revenues. Deferred revenue decreased to $29.3 million at October 31, 2024 from $30.4 million at July 31, 2024 primarily due to decreases in the BOSS Revolution’s and traditional calling cards’ deferred revenue balances.

Customer funds deposits liabilities increased to $95.0 million at October 31, 2024 from $91.9 million at July 31, 2024. Our restricted cash and cash equivalents included an aggregate of $95.0 million and $90.7 million at October 31, 2024 and July 31, 2024, respectively, held by IDT Financial Services and our VIE for these customer funds.

In September 2017, we and certain of our subsidiaries were certified by the New Jersey Economic Development Authority, or NJEDA, as having met the requirements of the Grow New Jersey Assistance Act Tax Credit Program. The program provides for credits against a corporation’s New Jersey corporate business tax liability for maintaining a minimum number of employees in New Jersey, and that tax credits may be sold subject to certain conditions. On June 5, 2023, we received a 2019 tax credit certificate for $1.8 million from the NJEDA. In August 2023, we sold the certificate for cash of $1.6 million.

On June 21, 2018, the United States Supreme Court rendered a decision in South Dakota v. Wayfair, Inc., holding that a state may require a remote seller with no physical presence in the state to collect and remit sales tax on goods and services provided to purchasers in the state, overturning certain existing court precedent. It is possible that one or more jurisdictions may assert that we have liability for periods for which we have not collected sales, use or other similar taxes, and if such an assertion or assertions were successful it could materially and adversely affect our business, financial position, and operating results. One or more jurisdictions may change their laws or policies to apply their sales, use or other similar taxes to our operations, and if such changes were made it could materially and adversely affect our business, financial position, and operating results.

As discussed in Note 16 to the Consolidated Financial Statements included in Item 1 to Part I of this Quarterly Report, we (as well as other defendants) were named in a class action on behalf of the stockholders of our former subsidiary, Straight Path. On October 3, 2023, the Court of Chancery of the State of Delaware dismissed all claims against us, and found that, contrary to the plaintiffs’ allegations, the class suffered no damages. The plaintiffs will have 30 days from entry of the final order to file an appeal.

Investing Activities

Our capital expenditures were $5.3 million and $4.3 million in the three months ended October 31, 2024 and 2023, respectively. We currently anticipate that total capital expenditures in the twelve-month period ending October 31, 2025 will be $19 million to $20 million. We expect to fund our capital expenditures with our net cash provided by operating activities and cash, cash equivalents, debt securities, and current equity investments on hand.

In both the three months ended October 31, 2024 and 2023, each of the EMI’s shareholders, including us, purchased additional shares of the EMI’s convertible preferred stock. We paid an aggregate of $0.7 million in both the three months ended October 31, 2024 and 2023, respectively, to purchase additional shares. At October 31, 2024, we were committed to purchase additional shares of the EMI’s convertible preferred stock in January 2025 for $0.3 million.

Purchases of debt securities and equity investments were $12.7 million and $7.8 million in the three months ended October 31, 2024 and 2023, respectively. Proceeds from maturities and sales of debt securities and redemptions of equity investments were $9.9 million and $17.1 million in the three months ended October 31, 2024 and 2023, respectively.

Financing Activities

In the three months ended October 31, 2024, we paid a cash dividend of $0.05 per share on our Class A and Class B common stock. In the three months ended October 31, 2024, we paid aggregate cash dividends of $1.3 million.

We distributed cash of nil and $0.1 million in the three months ended October 31, 2024 and 2023, respectively, to the noncontrolling interests in certain of our subsidiaries.

Our subsidiary, IDT Telecom, Inc., or IDT Telecom, entered into a credit agreement, dated as of May 17, 2021, with TD Bank, N.A. for a revolving credit facility for up to a maximum principal amount of $25.0 million. As of July 15, 2024 and July 28, 2023, IDT Telecom and TD Bank, N.A. amended certain terms of the credit agreement. IDT Telecom may use the proceeds to finance working capital requirements and for certain closing costs of the facility. At October 31, 2024 and July 31, 2024, there were no amounts outstanding under this facility. In the three months ended October 31, 2024 and 2023, IDT Telecom borrowed and repaid an aggregate of $14.2 million and $30.3 million , respectively, under the facility. The revolving credit facility is secured by primarily all of IDT Telecom’s assets. The principal outstanding bears interest per annum at the secured overnight financing rate published by the Federal Reserve Bank of New York plus 10 basis points, plus depending upon IDT Telecom’s leverage ratio as computed for the most recent fiscal quarter, 125 to 175 basis points. Interest is payable monthly, and all outstanding principal and any accrued and unpaid interest is due on May 16, 2026. IDT Telecom pays a quarterly unused commitment fee of 10 basis points on the average daily balance of the unused portion of the $25.0 million commitment. IDT Telecom is required to comply with various affirmative and negative covenants as well as maintain certain targets based on financial ratios during the term of the revolving credit facility. As of October 31, 2024, IDT Telecom was in compliance with all of the covenants.

In the three months ended October 31, 2023, we received cash from the exercise of stock options of $0.2 million for which we issued 12,500 shares of our Class B common stock. There were no stock option exercises in the three months ended October 31, 2024.

We have an existing stock repurchase program authorized by our Board of Directors for the repurchase of shares of our Class B common stock. In January 2016, the Board of Directors authorized the repurchase of up to 8.0 million shares in the aggregate. In the three months ended October 31, 2024, we repurchased 37,714 shares of our Class B common stock for an aggregate purchase price of $1.3 million. In the three months ended October 31, 2023, we repurchased 125,470 shares of our Class B common stock for an aggregate purchase price of $2.8 million. At October 31, 2024, 4.4 million shares remained available for repurchase under the stock repurchase program.

In the three months ended October 31, 2024 and 2023, we paid $1.1 million and $15,000, respectively, to repurchase 24,290 and 654 shares, respectively, of our Class B common stock that were tendered by employees of ours to satisfy the employees’ tax withholding obligations in connection with the lapsing of restrictions on restricted stock and shares issued for bonus payments. Such shares were repurchased by us based on their fair market value as of the close of business on the trading day immediately prior to the vesting date.

Other Sources and Uses of Resources

From time to time we consider spin-offs and other potential dispositions of certain of our subsidiaries. A spin-off may include the contribution of a significant amount of cash, cash equivalents, debt securities, and/or equity securities to the subsidiary prior to the spin-off, which would reduce our capital resources. There is no assurance that a transaction will be completed.

We intend to, where appropriate, make strategic investments and acquisitions to complement, expand, and/or enter into new businesses. In considering acquisitions and investments, we search for opportunities to profitably grow our existing businesses and/or to add qualitatively to the range and diversification of businesses in our portfolio. We cannot guarantee that we will be presented with acquisition opportunities that meet our return-on-investment criteria, or that our efforts to make acquisitions that meet our criteria will be successful.

Foreign Currency Risk

Revenues from our international operations were 21% and 26% of our consolidated revenues in the three months ended October 31, 2024 and 2023, respectively. A significant portion of our revenues is in currencies other than the U.S. Dollar. Our foreign currency exchange risk is somewhat mitigated by our ability to offset a portion of these non-U.S. Dollar-denominated revenues with operating expenses that are paid in the same currencies. While the impact from fluctuations in foreign exchange rates affects our revenues and expenses denominated in foreign currencies, the net amount of our exposure to foreign currency exchange rate changes at the end of each reporting period is generally not material.

Investment Risk

We hold a portion of our assets in debt and equity securities, including hedge funds, for strategic and speculative purposes. At October 31, 2024 and July 31, 2024, the value of our debt and equity security holdings was an aggregate of $39.4 million and $35.0 million, respectively, which represented 7% and 6% of our total assets at October 31, 2024 and July 31, 2024, respectively. Investments in debt and equity securities carry a degree of risk and depend to a great extent on correct assessments of the future course of price movements of securities and other instruments. There can be no assurance that our investment managers will be able to accurately predict these price movements. The securities markets have in recent years been characterized by great volatility and unpredictability. Accordingly, the value of our investments may go down as well as up and we may not receive the amounts originally invested upon redemption.

Evaluation of Disclosure Controls and Procedures. Our Chief Executive Officer and Chief Financial Officer have evaluated the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) of the Securities Exchange Act of 1934, as amended), as of the end of the period covered by this Quarterly Report on Form 10-Q. Based on this evaluation, our Chief Executive Officer and Chief Financial Officer have concluded that our disclosure controls and procedures were effective as of October 31, 2024.

Changes in Internal Control over Financial Reporting. There were no changes in our internal control over financial reporting during the fiscal quarter ended October 31, 2024 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.