IDT CORP (IDT)

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.

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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.

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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

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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.

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Item 7. Management’s Discussion and Analysis
of Financial Condition and Results of Operations.

This Annual Report 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 this Annual Report. The forward-looking statements
are made as of the date of this Annual 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 Securities and Exchange
Commission pursuant to the Securities Act of 1933 and the Securities Exchange Act of 1934, including our periodic and current reports
on Forms 10-Q and 8-K.

The following discussion should be read in conjunction
with the Consolidated Financial Statements and Notes thereto included in Item 8 of this Annual Report.

Our Management’s Discussion and Analysis of
Financial Condition and Results of Operations included in this Annual Report generally discusses fiscal 2025 and fiscal 2024 items and
year-to-year comparisons between fiscal 2025 and fiscal 2024. Discussions of fiscal 2023 items and year-to-year comparisons between fiscal
2024 and fiscal 2023 that are not included in this Annual Report can be found in “Management’s Discussion and Analysis of
Financial Condition and Results of Operations” in Part II, Item 7 of our Annual Report on Form 10-K for the fiscal year ended July 31,
2024.

CRITICAL ACCOUNTING ESTIMATES

Our financial statements and accompanying notes are
prepared in accordance with accounting principles generally accepted in the United States of America, or U.S. GAAP. The preparation of
financial statements requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenue,
and expenses as well as the disclosure of contingent assets and liabilities. Critical accounting estimates are estimates made in accordance
with U.S. GAAP that involve a significant level of estimation uncertainty and have had, or are reasonably likely to have, a material
impact on our financial condition or results of operations. Our critical accounting estimates include those related to goodwill impairment
testing, valuation of long-lived assets, allowance for credit losses, and income taxes, sales taxes, and regulatory agency fees. See
Note 1 to the Consolidated Financial Statements in Item 8 to Part II of this Annual Report for a complete discussion of our significant
accounting policies.

Goodwill Impairment Testing

Under U.S. GAAP, goodwill is not amortized but is
reviewed annually for impairment at a level of reporting referred to as a reporting unit. A reporting unit is an operating segment, or
one level below the operating segment, depending on whether certain criteria are met.

Our annual assessment date is May 1. An interim impairment
test would be required whenever events or circumstances make it more likely than not that an impairment may have occurred. The goodwill
impairment test compares the fair value of a reporting unit with its carrying amount. We would recognize an impairment charge for the
amount by which the carrying amount exceeds the reporting unit’s fair value; however, the loss recognized would not exceed the
total amount of goodwill. Additionally, we consider income tax effects from any tax-deductible goodwill on the carrying amount of the
reporting unit when measuring the goodwill impairment loss, if applicable.

We have the option to perform a qualitative assessment
to determine whether it is necessary to perform the quantitative goodwill impairment test. However, we may elect to perform the quantitative
goodwill impairment test even if no indications of a potential impairment exist.

The carrying amount of our goodwill by reporting
unit was as follows:

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For our annual goodwill impairment test as of May
1, 2025, we performed qualitative assessments for all of our reporting units that indicated that it was more likely than not that the
fair values of our reporting units exceeded their respective carrying values and, therefore, did not result in an impairment.

For our annual goodwill impairment test as of May
1, 2024, we performed quantitative assessments of our Retail Communications and net2phone reporting units and qualitative assessments
for our Fintech and IDT Digital Payments reporting units. Our assessments did not indicate any goodwill impairment as of May 1, 2024.
For the quantitative assessments, we calculated the fair value of the reporting unit using a discounted cash flow method as a form of
the income approach. The discounted cash flow method is based on the present value of projected cash flows and a terminal value. The
terminal value represents the expected normalized future cash flows of the reporting unit beyond the projection period. We used a discount
rate based on the weighted-average cost of capital of comparable companies by Global Industry Classification Standard code that represented
our estimate of the expected return a marketplace participant would have required.

We do not believe we are currently at risk of goodwill
impairment based on qualitative assessments of our reporting units for the three months ended July 31, 2025. We considered several factors
in these qualitative assessments including (i) the business enterprise value of the reporting unit from the last quantitative test and
the excess of the fair value over carrying value, (ii) macroeconomic conditions including changes in interest rates and discount rates,
(iii) industry and market considerations including industry revenue, EBITDA margins, and multiples based on business enterprise value
to revenues and to EBITDA, and (iv) the recent financial performance and budget of the reporting unit.

Calculating the fair value of a reporting unit requires
significant estimates and assumptions by management. The key assumptions and judgments underlying our quantitative assessment include
the discount rates and terminal growth rates used in our discounted cash flow analysis, the revenue and EBITDA projections for our reporting
units, and estimates of future levels of gross and operating profits and capital expenditures. Should the estimates and assumptions regarding
the fair value of the reporting units prove to be incorrect, we may be required to record impairments to goodwill in future periods.

Valuation of Long-Lived Assets

We test the recoverability of our long-lived assets
whenever events or changes in circumstances indicate that the carrying value of any such asset may not be recoverable. Such events or
changes in circumstances include:

There were no such events or changes in circumstances
in fiscal 2025 or fiscal 2024. If we determine that events or changes in circumstances indicate the carrying value of certain long-lived
assets may not be recoverable, we test for impairment based on the projected undiscounted cash flows to be derived from such asset. If
the projected undiscounted future cash flows are less than the carrying value of the asset, we will record an impairment loss based on
the difference between the estimated fair value and the carrying value of the asset. We generally measure fair value by considering sale
prices for similar assets or by discounting estimated future cash flows from the asset using an appropriate discount rate. Cash flow
projections for specific assets and fair value estimates of assets require significant estimates and assumptions by management that have
a significant level of estimation uncertainty. Should our estimates and assumptions prove to be incorrect, we may be required to record
impairments in future periods and such impairments could be material.

Allowance for Credit Losses on Accounts Receivable

Our allowance for credit losses was $9.1 million
and $6.4 million at July 31, 2025 and 2024, respectively, partially due to an increase in credit losses related to ads and data. The allowance as a percentage of gross trade accounts receivable increased
to 17.5% at July 31, 2025 from 13.1% at July 31, 2024 because, at July 31, 2025 compared to July 31, 2024, gross trade accounts receivable
increased 7.0% and the allowance increased 43.2%. The most significant increase in the trade accounts receivable balance at July 31,
2025 compared to July 31, 2024 was in NRS.

For our allowance for trade accounts receivable,
we record an expense based on a forward-looking current expected credit loss model to maintain our allowance for credit losses. We consider
the probability of recoverability of accounts receivable based on past experience, considering current collection trends and general
economic factors, including bankruptcy rates. We also consider future economic trends to estimate expected credit losses over the lifetime
of the asset. Credit risks are assessed based on historical write-offs, net of recoveries, as well as an analysis of the aged accounts
receivable balances with allowances generally increasing as the receivable ages. Accounts receivable may be fully reserved for when specific
collection issues are known to exist, such as pending bankruptcies. Account balances are written off against the allowance when it is
determined that the receivable will not be recovered.

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Our allowance for credit losses estimate is subject
to change due to new developments, changes in assumptions or changes in our strategy. We continually assess the likelihood of potential
amounts or ranges of recoverability and adjust our allowance accordingly; however, actual collections and write-offs of trade accounts
receivables may materially differ from our estimates.

Income Taxes, Sales Taxes, and Regulatory Agency
Fees

Our current and deferred income taxes and associated
valuation allowance, accruals for sales taxes, and telecom regulatory agency fee accruals, are impacted by events and transactions arising
in the normal course of business as well as in connection with special and non-routine items. Assessment of the appropriate amount of
income taxes, sales taxes, and regulatory agency fees is dependent on several factors, including estimates of the timing and realization
of deferred income tax assets, judgments about the potential results of audits and applicability of regulatory agency rules and regulations,
as well as judgments and assumptions about changes in inco

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