Good afternoon again, everybody. This is Matt Hodges with Three Part Advisors. For our last but not least presentation in Presentation Room 1 for the ECIC 2025, we have IDT Corporation. IDT Corporation is a $1.5 billion market cap global provider of fintech, cloud communications, and traditional communication solutions. The business is operated under four segments: National Retail, Boss Money, net2phone, and Traditional Communications. IDT is a profitable, growing company with a solid balance sheet and a shareholder-friendly approach to capital allocation. Last quarter, they increased their dividend payout by 20%. The company has also repurchased $16 million worth of shares over the last trailing 12 months. Presenting today are Marcelo Fischer, CFO, and Head of Investor Relations, Bill Ulrey. Thank you, guys. Thanks for joining us. Over to you.
Good afternoon. Thank you for being here, and thank you to the whole IDT team for putting together a real nice conference. I'm here with Bill Ulrey today, with IDT's head of investor relations, and Bill will get started.
Thank you, Marcelo. Please note that we'll be discussing our financial and operational results for IDT's third quarter of fiscal year 2025, and that's the three months ended April 30, 2025. Let's begin with some basics about IDT. We're an innovative SaaS and fintech services company headquartered across the Hudson in Newark, New Jersey. We're a small-cap company, and as was mentioned, we have a market cap of $1.5 billion, now closer to $1.6 billion, an increase of 80% over the past year. We're profitable and generate significant cash, some of which we return to investors through our regular quarterly dividend and opportunistically through stock repurchases. With our strong balance sheet, including $224 million in cash and current investments and no debt, we have considerable strategic flexibility.
For those of you who can see this, able to look at the slides, you can see here our disbursement of our workforce is truly global in terms of its scope. Our technology, sales, and marketing teams are in locations around the world. IDT operates six primary businesses, each serving an underserved consumer or B2B market. In today's presentation, we will focus on the three high-margin growth businesses listed on the left-hand side of this slide: NRS, Boss Money, and net2Phone. Collectively, they're the primary drivers of IDT's top and bottom line growth and of our value creation. On the right-hand side of this slide are our three largest businesses in terms of revenue. All three sit within our Traditional Communication segment, which generates robust cash flows to finance early-stage growth initiatives throughout the company.
They fund our dividends and buybacks and help us build our balance sheet. Now let's dig into some of the high-growth, high-margin, the three high-growth, high-margin businesses. We'll start with the first of these is NRS. National Retail Solutions operates the largest point-of-sale platform for independent retailers in the country. We founded this business about nine years ago after having worked with many of the retailers that sold IDT's Boss Revolution calling service for many years before that. Through these relationships, it became apparent to us that these mom-and-pop retailers needed better technology to compete against the large retail chains who were moving into their turf. We launched NRS to level the playing field. Our proprietary POS solution provides these retailers with essential tools and services to help them manage their businesses more easily and profitably.
As of April 30th, NRS operated 35,600 active terminals in approximately 31,000 stores. Just to give you some sense of scale and comparison, the largest retail chains in the U.S. in terms of store count are Dollar General and Subway, and they each have about 20,000 stores. The primary addressable market for the NRS platform is independently owned C stores and bodegas, liquor stores, and tobacco shops here in the U.S. Good data on how large this market is is very hard to come by, but based on what's available, we estimate there are about 200,000 of these stores in the U.S. We still have about 82% of our addressable market available to us. We've been adding an average of 440 new terminals net of churn per month over the past year. The bottom line here is that we continue to rapidly expand our network.
We have an exceptionally long runway in this market, which is highly fragmented, highly fragmented with limited competition. NRS's recurring revenues exclude the one-time sales of the POS hardware. We think about them in terms of three different offerings. First, merchant services, which is predominantly generated by our payment processing service, and that enables our retailers to accept credit and debit cards and is offered under the NRS Pay brand. NRS Pay also includes other forms of electronic services such as EBTs, other forms of electronic payment. Second, advertising and data revenue, which is predominantly sales of advertising inventory displayed to consumers on the POS's customer-facing digital screen. Finally, SaaS fee revenues are the monthly recurring fees paid by the retailers for the use of the software that drives the POS's functionalities.
NRS's recurring revenue increased 23% year over year in the third quarter to $29.4 million and grew at a 70% CAGR from 2021 to 2024. The primary driver of the increase has been the expansion of our POS network to new retailers. In addition, we've been working to increase the monthly average recurring revenue per terminal. Recurring revenue per terminal in the third quarter was $279 a month, and that's up from $271 or 3% over the past year. Now we're going to go through each of these revenue streams in somewhat greater detail. Let's start with the largest. It was merchant services. Over 90% of the revenue in merchant services is contributed by NRS Pay, which is now utilized by about 25,000 retailers. For Q3, our most recent quarter, the number of NRS Pay accounts increased by 31% year over year.
It is expanding more quickly than our terminal network. Over the past few years, we have introduced several premium NRS Pay plans to drive increases in revenue per account. Those increases helped us sustain a 37% year-over-year increase in merchant services revenue during Q3 to nearly $20 million. Here, the four-year CAGR is 91%. Advertising and data. NRS sells its large and growing in-store retail media ad inventory both through direct sales efforts and programmatic platforms. This vertical includes revenue from sales of our POS's transaction data to consumer marketers. Advertising and data together is the most volatile component of the recurring revenue, our most volatile recurring revenue stream, and also the most heavily seasonal. In Q3, revenue was $5.9 million, and that is typically the lowest revenue quarter of our fiscal year, and it was a 12% decrease from the year earlier.
Although advertising revenue is impacted by industry-wide factors beyond our control, the business offers significant upside potential. Now let's take a look at SaaS fee revenue. NRS retailers pay a monthly recurring charge for the software services that each active POS terminal utilizes, and that MRC ranges between $20 and $75 per month per terminal. We've successfully increased the average MRC in recent years by migrating retailers to premium SaaS plans. That increase in the MRC, along with the expansion of our POS network, drove a 33% year-over-year increase in SaaS fee revenues to $3.9 million in Q3. The four-year SaaS fee CAGR was 51%, has been 51%. We expect continued growth along these lines in the coming years. To step back, NRS's economics are extremely attractive. The only significant cost of goods sold are for the terminals themselves.
Moreover, approximately half of NRS's SG&A is fixed or semi-fixed. The economics of the business will continue to improve as we grow. In Q3 of fiscal 2025, NRS generated $7.2 million in adjusted EBITDA on $31.1 million in total revenue for an EBITDA margin of 23%. If you think about that in terms of the rule of 40, we achieved a 49% score in Q3, suggesting an appropriate balance of growth and profitability. To wrap up, NRS is a fantastic business, both operationally and financially, and has a long runway ahead. Now I'll turn the call back over to Marcelo to talk about the next business, Boss Money.
Sure. Yeah. Just to clarify, our fiscal year ends on July 31. The Q3 results that we're making reference to, that we announced one week ago, are for the months of February, March, and April. Boss Money is our international money remittance business. It generates over 90% of the revenue of our fintech segment, which also includes all the much smaller early-stage fintech initiatives. When we launched Boss Money about a decade ago, we did so by leveraging our nationwide retail customer base, our Boss brand, and our retail distribution network to build the business from the ground up. Today, Boss Money customers here in the United States send their cash to friends and family in 50 countries. Boss Money goes to market through two channels, digital and retail.
Over 80% of our transactions originate through our digital channel by customers using our Boss Money and Boss Revolution apps. Our retail channel, where the customers visit a Boss Money retailer agent and can pay with cash, brings large numbers of new, often unbanked customers into the Boss ecosystem. Because our business is predominantly digital, our growth profile is closer to pure digital channel players like Remitly, rather than traditional retail channel-centric remittance operators. Boss Money is growing robustly in the dominant digital channel. Digital transaction volume increased 32% in Q3, while send volume, the total amount transferred, increased by 40% as customers shifted towards sending larger amounts less frequently. Digital revenue increased 31% to $24.5 million in the third quarter. Our four-year annualized digital revenue growth rate is 27%.
Although the money remittance industry is extremely competitive, as you just saw in the previous slide on our revenue growth, we have been able to achieve and sustain one of the highest growth rates in the industry, primarily by leveraging the synergies of our customer acquisition and retention provided by cross-marketing Boss Money with our larger Boss Revolution calling and mobile top-up customer bases, or as we refer to it, the larger Boss ecosystem advantage. In fiscal 2025, we are spending roughly $15 million marketing the Boss brand, primarily targeting the large populations of first and second-generation American immigrants from our core market corridors. Once we have successfully onboarded a customer in any of our Boss offerings, we are consistently able to upsell to them. To give you a sense of the scope of this effort, last month, we delivered approximately 50 million impressions to Boss customers.
In fiscal 2024, Boss customers initiated 86 million transactions. This Boss ecosystem is a unique reinforcing asset that significantly lowers our customer acquisition cost and increases our customer lifetime value. Looking ahead, we are pursuing a variety of exciting cross-selling initiatives to build on our momentum. As Boss Money scales, our unit cost structure continues to improve. We leverage our larger transaction volumes to cut better deals with payout partners, while at the same time also optimizing our operating model through automation, leaning more and more on AI. The fintech segment turned adjusted EBITDA positive last year, and in the third quarter of this fiscal year, for the very first time, it generated adjusted EBITDA of over $5 million. The adjusted EBITDA margin increased to 13%.
Thinking ahead about Boss Money's profitability, many of the public players in the money transfer space generate 15%-25% adjusted EBITDA margins. We are working to achieve comparable levels of profitability as we continue to scale the business over the next few years. Now let's turn back to our last high-margin growth business, net2Phone. Bill?
net2Phone is IDT's long-standing B2B brand and provides cloud-based communication services to businesses in North America and also to the underserved South American market. Under the Unite brand name, net2Phone's Unified Communications as a Service offering is priced in differentiated tiers starting at $19.95 per user per month here in the U.S., while You Contact, net2Phone's contact center as a service offering, starts at $59.99 per seat per month here in the U.S. Both services are also offered in our South American markets, which comprise approximately half of our total seats served. net2Phone's solid growth and cash generation are a function of several strategic differentiators that, in their totality, insulate it somewhat from the fierce competitive pressures in the industry.
These differentiators include net2Phone's focus on middle market enterprises rather than the largest multinational accounts, a channel-centric approach that makes it easy for technology partners to price, provision, and service net2Phone's UCaaS and CCaaS offerings. Finally, net2Phone is uniquely focused on North and South America. Latin America remains an underserved market, and net2Phone has prospered there with truly localized offerings that are difficult for the largest players to replicate. At the close of Q3 of fiscal 2025, Net2Phone served 415,000 UCaaS plus CCaaS seats across North and South America. Seats served increased 8% year-over-year, driving a 7% increase in subscription revenue. Looking at that on a constant currency basis, revenue increased 11%. net2Phone's third quarter fiscal 2025 adjusted EBITDA jumped 50% year-over-year to $3.2 million, while the adjusted EBITDA margin increased to 15% from 10%.
Margin expansion has been and will continue to be a key long-term driver of Net2Phone's bottom-line growth. The company has benefited from operating leverage, growth of its higher RPU CCaaS offerings, and tremendous financial discipline to drive its bottom-line improvement. We expect to continue to drive RPU and margin expansion in the coming year by migrating customers to premium plans and offerings with AI-powered features. Most notably, net2Phone recently launched its AI agent. It's a scalable virtual assistant that provides exceptional customer experiences across sales, support, and administrative tasks. Early customer feedback has been amazingly positive, and we are excited about the potential here, both to increase our pool from our current customer base and to accelerate customer acquisitions. Now to talk about our traditional communication segment. Back to you, Marcelo. You want to take the page?
IDT Digital Payments, Boss Revolution calling, and IDT Global Carrier Services, along with other small offerings, comprise our traditional communications segment. In aggregate, this segment generated $867 million in revenue over the trailing 12 months, equal to 71% of IDT's consolidated revenue. Revenue from the largest of these businesses, IDT Digital Payments, mostly consists of sales of mobile top-up, which is a service that enables customers to transfer airtime and bundles of airtime messaging and data to international and domestic mobile accounts. Revenue from this business has been stable over the past year, while its contribution to bottom-line profitability has increased significantly. Our Boss Revolution and IDT Global Carrier Services businesses are legacy businesses in the paid minute international long-distance calling industry, which is in a long-tailed terminal decline.
As you can see, we have been able to increase traditional communications adjusted EBITDA significantly over the past year, even as revenues have decreased. This has mostly been driven by good pricing execution in our digital payments business and from the positive impact of cost reductions and efficiencies implemented over the prior year. In the third quarter, traditional communications adjusted EBITDA increased by $4.5 million year-over-year, a 30% increase to $19.3 million, even as traditional communications revenue decreased by $11.5 million, or 5%. Now that we discussed all the segments, let's just wrap up by taking a quick look at the consolidated results. In fiscal 2022, the segments that held IDT's three high-margin growth businesses contributed 39% of the company's consolidated gross profit.
By Q3 2025, that percentage of GP from the growth business segments had risen to 61%, helping to drive IDT's consolidated gross profit margin to a record 37.1%, a 470 basis points increase compared to the year-ago quarter. Looking at our trailing 12 months, the high-growth, high-margin business segments had an average gross profit margin of 75% compared to 19% for traditional communications. This continued rotation of the revenue mix to the growth businesses will continue to drive gross margin expansion for the foreseeable future. IDT generated $120.4 million in adjusted EBITDA in the trailing 12 months, and we expect to generate at least $126 million for all of fiscal 2025 as our growth businesses continue to gain scale. This is a significant step up from the $89.7 million that we generated in fiscal 2024.
IDT has also built a very strong balance sheet, including $224 million in cash, cash equivalents, debt securities, and current equity investments as of April 30, and we have no debt. Our strong balance sheet provides us with considerable strategic flexibility, and we routinely scout and evaluate M&A opportunities across our business. IDT returns value directly to our stockholders through both our regular quarterly dividend, which we just increased from $0.20 to $0.24 per share earlier this year, and through opportunistic stock repurchases, which totaled $21 million over the last year. Now, Bill and myself, I'm happy to take any questions. Okay.
Hi.
Hey. Thank you guys for doing this. Congrats on all the success you've had, and it's really exciting to see the leverage in the business and also the businesses. In your growth business, as those have become bigger and bigger, it's really exciting to see kind of line of sight for those that are really being big. When we look at the amount of cash you've generated over the last 12 months, you guys have done a great job, I think, with capital allocation. If you think over the next two to three years and the trajectory of the growth businesses continue, I know that the traditional communications business will slow down and probably contribute less cash than it has.
It seems like the bigger businesses are picking up slack, and perhaps actually, it looks like we're kind of at a flushing point where you guys will probably generate more cash over the next three years than you did over the last couple of years. How do you think about deployment? Is it dividends or buybacks or M&A? I think we'll just have a lot of cash, and it seems like buybacks are a gun, but this isn't super liquid. What do you think is the most realistic expectation for the show?
Right. So the answer is all of the above, right? At the current moment, we are deploying a lot of that cash before it gets deployed to fund the working capital needs of the growth, particularly of the Boss Money business, which requires a lot of working capital to fund weekend transactions. We have increased the amount of repurchases of stock, and it's likely that we'll continue to repurchase more of the stock and may consider doing a special dividend at some point or just to raise our current dividend. By far, by far, the main objective is to utilize that gunpowder in the balance sheet to look for acquisitions that could be great value creators for the company. We are very conservative when we look at acquisitions. We really need to find the right one that adds tremendous value.
If we do find that one, we will not be shy on deploying all of our cash and even, not even, but including taking a meaningful amount of debt onto the balance sheet if we find the right opportunity. That is really what we have been scouting for. There are a lot of things that we are looking at on a daily basis.
How many opportunities have you examined?
We, by and large, are looking at opportunities mostly on the high-growth segment. We look at opportunities in NRS. NRS today is a U.S.-centric business, extremely successful. We know we could replicate the NRS story in other countries, in other markets. Latin America would be a very natural place to take an NRS business next. It would be far easier if we could find the right acquisition opportunity or joint venture opportunity in one of those countries to launch NRS over there. We have been looking at some of those opportunities in the NRS space. When it comes to the net2Phone space, we have been looking at opportunities to complement our technology, especially on the AI side of the business, smaller type of acquisitions. On the Boss Money side, on the money transfer side, we have always been big believers that scale matters a lot.
Joining forces and acquiring one of our competitors could make a huge difference in terms of the amount of cost synergies that this business can drive. As this business scales, the more volumes you bring to the table, the better pricing you can get from distribution disbursement partners. It makes a lot of sense for us to be able to grow the Boss Money business, not just organically, as we have done, but also through an acquisition. When it comes to our traditional segment, by and large, the opportunities there for acquisitions are not really that meaningful. We are really running those businesses more for cash flow generation. We do not really spend much time in acquisitions on that segment.
What's the management structure?
Sure, sure. Each one of our segments has their own management team: CEO, CFO, COO. We try to make sure that each of the segments' management is fully focused just in running their business. At the corporate level, we provide corporate support in terms of evaluating acquisitions, in coaching those management teams in deciding how much capital to allocate in those new initiatives. We leave the segment management to operate, while the capital allocation decisions, strategic decisions, acquisition decisions are carried mostly at the corporate level.
Can you go into a little more color into how you see our traditional communications?
We have developed right now an AI agent bot which we are looking to deploy into our UCaaS and CCaaS customer base to really help and facilitate the work that's done mostly at customer care centers for our clients. We believe the bot that we created is a very good one. We have deployed already that AI agent in our own businesses. Our Boss Money customer centers and NRS customer centers are using those AI agents internally. The people managing those call centers in IDT really like it. It's hard to please our people internally, but they really like that AI agent. Today, for example, if you want to interact with our Boss Money customer care and chat, you're not going to be talking to or chatting with a human being. You're chatting already with our AI bot.
Now our goal and our objective is continuing to refine and fine-tune our AI agent bot and create the means to go to market and offer it as a separate new revenue driver for the net2Phone Business.
In the legacy businesses, what are the major threats, so to speak?
The legacy business, again, it's mostly two businesses, right? It's the international long-distance minutes business, both the Boss Revolution calling business and the wholesale global carrier business. That industry has been in decline now for almost two decades, right? I mean, more and more people are not paying to make a phone call. They're using WhatsApp and other peer-to-peer free calling services. We have identified that decline already many years ago, and that's why we pivoted already many years ago to try to leverage our competitive advantages of customer-based brand distribution away from dependency on minutes and into all these new initiatives. Just to give you an example, if you go back about 10 years ago, we used to carry about 30 billion minutes in our network. We were probably the seventh largest carrier of minutes around the globe.
Today, we are still probably one of the top seven largest carriers of minutes in the globe, but we only carry about 7-8 billion minutes. So our raw material, which was the minutes, was our bread and butter, has declined by about 85% over the past 10 years, and yet our EBITDA profitability has doubled during that period of time, okay, as we grew all these other new initiatives and businesses.
What do you think your two major concerns are going forward?
In terms of the traditional business or in general?
In general.
In general, I mean, as a CFO, the things that keep me up at night always are regulatory environment changes that we do not control, and usually just cybersecurity, cyber risk. All of our products are platform-based services. You always hear in the news all types of cyber attacks, ransomware. We try to have robust cybersecurity controls within the company, but those are always something that concerns any CFO, as well as the regulatory changes, right? All the recent immigrant administration, all the new immigrant things happening right now that you read on the news, right? A lot of our customers are immigrants, right? We pay a lot of attention to those dynamics that could impact our business as well as our competitors in this space, whether it is Boss Money or NRS. Always that regulatory environment changing is something to be aware of.
It could be an opportunity. It could be a risk depending on how well you react to it.
Can you talk about the value that NRS provides to your merchants and why they would go with you over, say, a Clover or Square, and how, I guess, purpose-built your solution is?
I think that NRS has done a great, great job to demonstrate to the independent retailer that their success is our success. To really build that partnership and that trust that we are here to facilitate their business, to allow them to have the technology, the information for them to be able to compete against the 7-Elevens and other retailers that have better technology than they are. We really became successful in that. Today, NRS is the brand name for the independent retailer community. We try to show to our retailers that we're not just selling them a POS machine, but we have robust SaaS plans. Depending on which plan they sign up for, they can get more information and more to be able to compete. For example, you may have a retailer that's selling Coke, 16-ounce Coke for a dollar.
We could provide to that retailer what is the average Coke selling by other independent retailers in that zip code. If they are selling, for example, for $1.28, we inform that to the retailer so he could sell it for $1.25 and still make a profit. We enable retailers to understand what's happening in their communities, what inventory items they may not be having and selling in the store. They could be good sellers. We try to provide them with the ability to, now we are just launching now a partnership with DoorDash to allow retailers to be able to fulfill orders to customers. More and more people are trying not to come to the stores as much. They're busy. They're trying to order online.
We try to provide all types of solutions to make the independent retailer to be able to operate larger than he does today.
David, those are the qualitative things. I mean, quantitatively, we're not seeing churn from other competitors. It's not like we're losing stores to Clover. That almost never happens. It's always the story they're going out of business or selling into a new owner who then we have to resell and resell the POS. We just don't see it's not a competitive environment. In this particular niche, it's just we're not competing with other POS operators.
Of your churn, what percentage of it is that they're just selling or going out of business versus organic churn, which would be moving to another solution?
I'd say 90%.
I would say probably north of 90%. Of course, of course. You might lose a retailer occasionally because he didn't get adjusted to using a POS system. Maybe he didn't like the customer service. By and large, the lion's share is stores going out of business or transferring.
Okay. I guess it was all related to this NRS, but if there are 160,000 remaining terminals, why is that not attractive to some other competitors?
I think part of it, I mean, look, I'm sure it is attractive to them, but it's a very hard market to penetrate. We go to market three ways. We have about over 200 salespeople going to the ground. Remember, these are largely themselves, these stores, many of them are run by immigrants. English may not be their first language. There is a whole, it's not just like a corporate sale. You're not walking in in a suit and a tie, right, and selling these. You're going in, you're able to speak to their needs and experiences and owner and how you can make a tangible benefit and improvement to them. It's just a difficult process. Each sale feels like us, like a little mini campaign, right? We go to market that way through those boots on the ground.
We have a call center in Guatemala where we're calling in predominantly to Hispanic business owners, bodega owners, to convince them that they should give the POS a try. We go through distributors as well. The point being that it's a very difficult, highly fragmented market, that it would be costly for someone else to replicate that and start to do it. It would take a long time and be tough.