# IDT CORP (IDT) FY 2021 MD&A

Verbatim Item 7 Management's Discussion and Analysis from IDT CORP's 10-K for fiscal year 2021.

SEC filing source: https://www.sec.gov/Archives/edgar/data/1005731/000149315221025444/form10-k.htm
Accession: 0001493152-21-025444
Filing date: 2021-10-14
Report date: 2021-07-31
Extracted from Item 7 to the first post-MD&A boundary after HTML sanitization.
Confidence: high

Company profile: /company/IDT/
All MD&A years: /company/IDT/mda/
Next year: /company/IDT/mda/fy2022/ (FY 2022)

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 reports on Forms 10-Q and 8-K.

We
followed the disclosure requirements of Regulation S-K applicable to smaller reporting companies in this Annual Report on Form 10-K.
In accordance with Item 10(f)(2) of Regulation S-K, we qualify as a “smaller reporting company” because our public float
was below $200 million as of January 31, 2020, the last business day of our second quarter in fiscal 2020. Our public float as of January
29, 2021, the last business day of our second quarter in fiscal 2021, was $292.2 million. Therefore, in accordance with Item 10(f)(1)
of Regulation S-K, we will transition from the scaled disclosure available to smaller reporting companies to the disclosure requirements
applicable to all other companies beginning with our Quarterly Report on Form 10-Q for our first quarter in fiscal 2022.

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

CRITICAL
ACCOUNTING POLICIES

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 policies are those that require application of management’s most subjective or complex judgments, often as a result
of matters that are inherently uncertain and may change in subsequent periods. Our critical accounting policies include those related
to the allowance for doubtful accounts, goodwill, valuation of long-lived assets, and income taxes, sales taxes, and regulatory agency
fees. Management bases its estimates and judgments on historical experience and other factors that are believed to be reasonable under
the circumstances. Actual results may differ from these estimates under different assumptions or conditions. See Note 1 to the Consolidated
Financial Statements in this Annual Report for a complete discussion of our significant accounting policies.

31

Allowance
for Doubtful Accounts

Our
allowance for doubtful accounts was $4.4 million at July 31, 2021 and $6.1 million at July 31, 2020. The allowance for doubtful accounts
as a percentage of gross trade accounts receivable decreased to 8.7% at July 31, 2021 from 12.1% at July 31, 2020 because the allowance
for doubtful accounts decreased 27.1% and gross trade accounts receivable increased 1.7% at July 31, 2021 compared to July 31, 2020.

We
estimate the balance of our allowance for doubtful accounts by analyzing accounts receivable balances by age and applying historical
write-off and collection trend rates. Our estimates include separately providing for customer receivables based on specific circumstances
and credit conditions, and when it is deemed probable that the balance is uncollectible. Account balances are written off against the
allowance when it is determined that the receivable will not be recovered. Our estimates of recoverability of customer accounts may change
due to new developments, changes in assumptions or changes in our strategy, which may impact our allowance for doubtful accounts balance.
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.

Goodwill

Our
goodwill is attributable to reporting units in our Traditional Communications segment and to net2phone-UCaaS, which is both a segment
and a reporting unit. Goodwill was $14.9 million and $12.9 million at July 31, 2021 and 2020, respectively.

Goodwill
is not amortized. Instead, goodwill is reviewed annually (or more frequently under various conditions) for impairment. 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.

When
performing our quantitative annual, or interim, goodwill impairment test we are comparing the fair value of the 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 allocated to the reporting unit. 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. The fair value of the reporting unit is estimated using discounted cash flow methodologies, as well as
considering third party market value indicators. Our use of a discounted cash flow methodology includes estimates of future revenue based
upon budgets and projections. We also develop estimates for future levels of gross and operating profits and projected capital expenditures.
Our methodology also includes the use of estimated discount rates based upon industry and competitor analysis as well as other factors.

In
fiscal 2020, we performed a quantitative annual impairment test which resulted in no goodwill impairment since the estimated fair values
of our reporting units substantially exceeded their carrying value. In fiscal 2021, we performed a qualitative assessment and determined
that it was not necessary to perform the quantitative goodwill impairment test. In addition, we do not believe our reporting units are
currently at risk of goodwill impairment. Calculating the fair value of the reporting units requires significant estimates and assumptions
by management. 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 our goodwill in future periods and such impairments could be material.

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:

[[GREPCENT_TABLE]]
[["","\u25a0","significant actual underperformance relative to expected performance or projected future operating results;"]]
[[/GREPCENT_TABLE]]

[[GREPCENT_TABLE]]
[["","\u25a0","significant changes in the manner or use of the asset or the strategy of our overall business;"]]
[[/GREPCENT_TABLE]]

[[GREPCENT_TABLE]]
[["","\u25a0","significant adverse changes in the business climate in which we operate; and"]]
[[/GREPCENT_TABLE]]

[[GREPCENT_TABLE]]
[["","\u25a0","loss of a significant contract."]]
[[/GREPCENT_TABLE]]

There
were no such events or changes in circumstances in fiscal 2021 or fiscal 2020. If we determine that 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 and fair value estimates require significant estimates and assumptions by management. 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.

32

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, the results of audits, changes in tax laws or regulatory
agency rules and regulations, as well as unanticipated future actions impacting related accruals of regulatory agency fees.

The
valuation allowance on our deferred income tax assets was $11.5 million and $58.7 million at July 31, 2021 and 2020, respectively. In
fiscal 2021, we released $46.5 million of our valuation allowance on the portion of the deferred income tax assets that we are more likely
than not going to utilize. This release was mostly related to domestic deferred income tax assets. We used the framework of Accounting
Standards Codification, or ASC, Income Taxes (Topic 740) to determine whether the valuation allowance should be maintained or
reversed. We considered the scheduled expiration of our net operating losses included in our deferred tax assets, projected future taxable
income, and tax planning strategies in our assessment of the valuation allowance. The primary factors that resulted in the valuation
allowance release were the three consecutive years of profitability in the United States and expected future profitability in both the
United States and the United Kingdom that will utilize a significant portion of the net operating losses. Our tax planning strategies
were not a significant factor in the analysis. In fiscal 2020, due to taxable income in the United States, we utilized deferred tax assets
and released the corresponding valuation allowance to offset income tax expense of $3.5 million. In addition, in fiscal 2020, we released
an additional $8.4 million of the valuation allowance on the portion of the deferred tax assets that we are more likely than not going
to utilize because we forecasted future profitability in the United States.

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. We have evaluated our state tax filings with respect to the Wayfair decision
and are in the process of reviewing our remittance practices. 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.

Our
2017 FCC Form 499-A, which reports our calendar year 2016 revenue, is currently under audit by the USAC. The Internal Audit Division
of USAC issued preliminary audit findings and we have, in accordance with audit procedures, appealed certain of the findings. We are
awaiting a final decision by USAC on the preliminary audit findings. Depending on the findings contained in the final decision, we may
further appeal to the FCC. Although a final decision remains pending, we have been invoiced $2.9 million and $1.8 million on behalf of
the Federal Telecommunications Relay Services Fund and on behalf of the Universal Service Fund, respectively. We do not intend to remit
payment for these fees unless and until a negative decision on our appeal has been issued. In response to the aforementioned preliminary
audit findings, we made certain changes to our filing policies and procedures for years that remain potentially under audit. At July
31, 2021 and 2020, our accrued expenses included $38.3 million and $40.8 million, respectively, for FCC-related regulatory fees for the
year covered by the audit, as well as prior and subsequent years.

RECENTLY
ISSUED ACCOUNTING STANDARD NOT YET ADOPTED

In
June 2016, the Financial Accounting Standards Board issued Accounting Standards Update No. 2016-13, Financial Instruments—Credit
Losses (Topic 326), Measurement of Credit Losses on Financial Instruments, that changes the impairment model for most financial
assets and certain other instruments. For receivables, loans and other instruments, entities will be required to use a new forward-looking
current expected credit loss model that generally will result in the earlier recognition of allowance for losses. For available-for-sale
debt securities with unrealized losses, entities will measure credit losses in a manner similar to current practice, except the losses
will be recognized as allowances instead of reductions in the amortized cost of the securities. In addition, an entity will have to disclose
significantly more information about allowances, credit quality indicators, and past due securities. The new provisions will be applied
as a cumulative-effect adjustment to retained earnings. We will adopt the new standard on August 1, 2023. We are evaluating the impact
that the new standard will have on our consolidated financial statements.

33

RESULTS
OF OPERATIONS

As
of August 1, 2020, we revised our reportable business segments to reflect the growth of our financial technology and cloud communications
businesses and their increased contributions to our consolidated results. Our three reportable business segments, Fintech, net2phone-UCaaS,
and Traditional Communications, reflect management’s approach to analyzing results, its resource allocation strategy, and its assessment
of business performance. Comparative segment information has been reclassified and restated in all periods to conform to the current
period presentation. 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.

Coronavirus
Disease (COVID-19)

We
continue to monitor and respond to the impacts of the COVID-19 pandemic on all aspects of our business, including our customers, employees,
suppliers, vendors, and business partners.

Operationally,
our employees transitioned to work-from-home during the third quarter of fiscal 2020 and, to a large degree, continue to work-from-home.
Beginning in the fourth quarter of fiscal 2021, certain of our employees returned to our offices on a part-time basis. Our salespeople,
customer service employees, technicians, and delivery employees continue to serve our independent retailers, channel partners, and customers
with minimal interruption.

COVID-19
had mixed financial impacts on our businesses beginning in the third quarter of fiscal 2020 and continuing through the fourth quarter
of fiscal 2021. It drove increases in demand for our consumer offerings, principally BOSS Revolution Money Transfer, BOSS Revolution
Calling and Mobile Top-Up, through our digital channels beginning in the latter half of March 2020. Subsequently, digital transaction
levels have continued to increase relative to retailer originated transactions. Conversely, sales of consumer offerings originating through
retailers and channel partners slowed modestly in late March and April 2020 before stabilizing in the fourth quarter of fiscal 2020.
NRS was immaterially impacted by the closure of some of its retailers in the third quarter of fiscal 2020, but most re-opened quickly
and many attracted increased foot traffic following the onset of COVID-19 as local retailers are typically more accessible to pedestrian
traffic than big box retailers. The resilience of local retailers has enabled NRS to continue to expand sales of terminals, payment processing,
and advertising services. Carrier Services’ revenue, which had been declining as communications globally transition away from traditional
international long-distance voice, declined more rapidly following the onset of COVID-19 as business communications shifted from calling
to video conferencing and other collaboration platforms.

At
the onset of COVID-19, the transition from offices to a more flexible workforce increased the demand for net2phone-UCaaS’ offerings.
Customers transitioned from their on-premises phone system to net2phone-UCaaS’ cloud solution, ported their phone numbers, and
quickly set-up their employees to work remotely. In April 2020, the release of Huddle, net2phone-UCaaS’ integrated video conferencing
solution, significantly improved net2phone-UCaaS’ functionality for remote work, which also increased the demand for its services.
COVID-19 had mixed financial impacts on net2phone-UCaaS’ business beginning in the third quarter of fiscal 2020. Its customer base
growth slowed somewhat in the second half of fiscal 2020 in certain Latin American markets. However, Latin American sales rebounded in
the first quarter of fiscal 2021 and sales have remained strong in its United States and Canadian markets. In the second half of fiscal
2021, COVID-19 cases increased in Latin America, in particular Brazil, and in Spain. This caused businesses to downsize or shutdown,
which reduced its customer base and revenues. In the fourth quarter of fiscal 2021, the demand for flexible communications solutions
for a hybrid workforce has resulted in an increase in new net2phone-UCaaS customers.

As
of the date of this Annual Report, including the impact of COVID-19, we expect that our cash from operations and the balance of cash,
cash equivalents, debt securities, and current equity investments that we held on July 31, 2021 will be sufficient to meet our currently
anticipated working capital and capital expenditure requirements during fiscal 2022. However, the situation remains fluid and we cannot
predict with certainty the potential impact of COVID-19 on our business, results of operations, financial condition, and cash flows.

Concentration
of Customers

Our
most significant customers typically include telecom operators to whom we provide wholesale services and distributors of our retail calling
products. While they may vary from quarter to quarter, our five largest customers collectively accounted for 14.5% and 12.7% of our consolidated
revenues in fiscal 2021 and fiscal 2020, respectively. Our customers with the five largest receivables balance collectively accounted
for 9.7% and 13.8% of the consolidated gross trade accounts receivable at July 31, 2021 and 2020, respectively. This concentration of
customers increases our risk associated with nonpayment by those customers. In an effort to reduce our risk, we perform ongoing credit
evaluations of our significant customers, and in some cases, do not offer credit terms to customers, choosing instead to require prepayment.
Historically, when we have issued credit, we have not required collateral to support trade accounts receivables from our customers. However,
when necessary, we have imposed stricter credit restrictions on our customers. In some cases, this has resulted in our sharply curtailing,
or ceasing completely, sales to certain customers. We attempt to mitigate our credit risk related to specific Carrier Services customers
by also buying services from the customer, in order to create an opportunity to offset our payables and receivables with the customer.
In this way, we can continue to sell services to these customers while reducing our receivable exposure risk. When it is practical to
do so, we will increase our purchases from Carrier Services customers with receivable balances that exceed our applicable payables in
order to maximize the offset and reduce our credit risk.

34

Explanation
of Performance Metrics

Our
results of operations discussion include the following performance metrics: active POS terminals, payment processing accounts, direct
cost of revenues as a percentage of revenues, seats, subscription revenue, and minutes of use.

NRS
uses two metrics, among others, 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 are being installed. Payment processing accounts are NRS PAY accounts that can generate revenue. It excludes accounts that have
been approved but not activated. NRS uses these two metrics in its analysis of revenue trends and comparisons between periods.

Direct
cost of revenues as a percentage of revenues is a financial metric that measures changes in our direct cost of revenues relative to changes
in revenues during the same period. Direct cost of revenues is the numerator and revenues are the denominator in this ratio. Direct cost
of revenues as a percentage of revenues is a useful metric for monitoring and evaluating trends in the net contribution of our revenues.

net2phone-UCaaS’
cloud communications offering is priced on a per-seat basis, with each customer employee identity constituting a seat, and its subscription
revenue is a monthly base fee per seat. The number of seats served and subscription revenue trends and comparisons between periods are
used in the analysis of net2phone-UCaaS’ revenues and direct cost of revenues.

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 Calling’s and Carrier Services’ 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.

Year
Ended July 31, 2021 compared to Year Ended July 31, 2020

The
following table sets forth certain items in our statements of income as a percentage of our total revenues:

[[GREPCENT_TABLE]]
[["Year ended July 31","","2021","","","2020"],["REVENUES:"],["Fintech","","","5.2","%","","","4.4","%"],["net2phone-UCaaS","","","3.0","","","","2.4"],["Traditional Communications","","","91.8","","","","93.2"],["TOTAL REVENUES","","","100.0","","","","100.0"],["COSTS AND EXPENSES:"],["Direct cost of revenues (exclusive of depreciation and amortization)","","","79.8","","","","80.5"],["Selling, general and administrative","","","15.1","","","","16.0"],["Depreciation and amortization","","","1.2","","","","1.5"],["Severance","","","\u2014","","","","0.3"],["TOTAL COSTS AND EXPENSES","","","96.1","","","","98.3"],["Other operating gain (expense), net","","","0.1","","","","(0.4",")"],["INCOME FROM OPERATIONS","","","4.0","","","","1.3"],["Interest income, net","","","\u2014","","","","0.1"],["Other income (expense), net","","","0.5","","","","(0.1",")"],["INCOME BEFORE INCOME TAXES","","","4.5","%","","","1.3","%"]]
[[/GREPCENT_TABLE]]

35

Fintech
Segment

Fintech,
which represented 5.2% and 4.4% of our total revenues in fiscal 2021 and fiscal 2020, respectively, comprises BOSS Revolution Money Transfer,
a provider of international money remittance and related value/payment transfer services, and NRS, operator of a nationwide POS network
providing payment processing, digital advertising, transaction data, and ancillary services. BOSS Revolution Money Transfer and NRS were
previously included in our Telecom & Payment Services segment.

[[GREPCENT_TABLE]]
[["(in millions)","","","","","Change"],["Year ended July 31","","2021","","","2020","","","$","","","%"],["Revenues:"],["BOSS Revolution Money Transfer","","$","49.6","","","$","47.9","","","$","1.7","","","","3.4","%"],["National Retail Solutions","","","24.7","","","","12.0","","","","12.7","","","","106.6"],["Total revenues","","","74.3","","","","59.9","","","","14.4","","","","24.1"],["Direct cost of revenues","","","26.2","","","","19.2","","","","7.0","","","","36.1"],["Selling, general and administrative","","","47.9","","","","35.8","","","","12.1","","","","33.9"],["Depreciation and amortization","","","1.7","","","","1.5","","","","0.2","","","","14.9"],["(Loss) income from operations","","$","(1.5",")","","$","3.4","","","$","(4.9",")","","","(143.2",")%"]]
[[/GREPCENT_TABLE]]

Revenues.
Revenues from BOSS Revolution Money Transfer increased in fiscal 2021 compared to fiscal 2020 driven primarily by increased transaction
volume in its digital channel, and a significant but diminished benefit from transient foreign exchange market conditions that ceased
by the end of the second quarter of fiscal 2021.

Revenues
from NRS increased in fiscal 2021 compared to fiscal 2020 driven primarily by the expansion of its POS network, and revenue growth from
its payment processing services and digital out-of-home advertising. Merchant services and other revenue, which includes payment processing
services, increased 295% to $7.8 million in fiscal 2021 from $2.0 million in fiscal 2020. Advertising and data revenue increased 95%
to $8.7 million in fiscal 2021 from $4.5 million in fiscal 2020. Active POS terminals increased 40% to 14,000 at July 31, 2021 from 10,000
at July 31, 2020. Payment processing accounts increased 124% to 5,600 at July 31, 2021 from 2,500 at July 31, 2020.

Direct
Cost of Revenues. Direct cost of revenues increased in fiscal 2021 compared to fiscal 2020 primarily due to the increase in revenues.
BOSS Revolution Money Transfer’s direct cost of revenues increased in fiscal 2021 compared to fiscal 2020 due to increased direct
cost of revenues in its digital channel.

[[GREPCENT_TABLE]]
[["Year ended July 31","","2021","","","2020","","","Change"],["Direct cost of revenues as a percentage of revenues","","","35.2","%","","","32.1","%","","","3.1","%"]]
[[/GREPCENT_TABLE]]

Direct
cost of revenues as a percentage of revenues increased 310 basis points in fiscal 2021 compared to fiscal 2020 primarily due to an increase
in direct cost of revenues as a percentage of revenues in BOSS Revolution Money Transfer’s digital channel, partially offset by
a decrease in direct cost of revenues as a percentage of revenues in NRS.

Selling,
General and Administrative. Selling, general and administrative expense increased in fiscal 2021 compared to fiscal 2020 primarily
due to increases in employee compensation, debit and credit card processing charges, sales commissions, and marketing expense. The increase
in card processing charges was the result of increased credit and debit card transactions through our BOSS Revolution Money app and other
digital channels. As a percentage of Fintech’s revenue, Fintech’s selling, general and administrative expense increased to
64.5% from 59.7% in fiscal 2021 and fiscal 2020, respectively.

Depreciation
and Amortization. Depreciation and amortization expense increased in fiscal 2021 compared to fiscal 2020 primarily due to increased
depreciation of capitalized costs of consultants and employees developing internal use software and increased depreciation of NRS’
POS equipment.

net2phone-UCaaS
Segment

The
net2phone-UCaaS segment, which represented 3.0% and 2.4% of our total revenues in fiscal 2021 and fiscal 2020, respectively, comprises
net2phone’s cloud communications offerings, which were previously included in our net2phone segment.

[[GREPCENT_TABLE]]
[["(in millions)","","","","","","","","Change"],["Year ended July 31","","2021","","","2020","","","$","","","%"],["Revenues","","$","43.9","","","$","31.8","","","$","12.1","","","","38.1","%"],["Direct cost of revenues","","","8.1","","","","6.4","","","","1.7","","","","26.9"],["Selling, general and administrative","","","45.0","","","","36.3","","","","8.7","","","","23.7"],["Depreciation and amortization","","","5.0","","","","4.1","","","","0.9","","","","22.9"],["Other operating expense, net","","","0.1","","","","0.1","","","","\u2014","","","","58.7"],["Loss from operations","","$","(14.3",")","","$","(15.1",")","","$","0.8","","","","5.4","%"]]
[[/GREPCENT_TABLE]]

36

Revenues.
net2phone-UCaaS’ revenues increased in fiscal 2021 compared to fiscal 2020 driven by growth in the United States, although
revenue increased in all net2phone-UCaaS regions. Seats served increased 47% to 226,000 at July 31, 2021 from 154,000 at July 31, 2020.
Subscription revenue increased 39% to $41.5 million in fiscal 2021 from $29.9 million in fiscal 2020, led by growth in the U.S. market.
net2phone-UCaaS launched its integration with Slack in the third quarter of fiscal 2021, building on its prior integrations with Zoho
and Microsoft Teams. Also in fiscal 2021, net2phone-UCaaS launched an integration with Salesforce. In November 2020, net2phone-UCaaS
announced it had launched its service in Peru and in December 2020, it expanded coverage to six additional cities in Brazil.

Direct
Cost of Revenues. Direct cost of revenues increased in fiscal 2021 compared to fiscal 2020 primarily due to the increase in revenues,
with the largest increases in the United States and Latin America.

[[GREPCENT_TABLE]]
[["Year ended July 31","","2021","","","2020","","","Change"],["Direct cost of revenues as a percentage of revenues","","","18.5","%","","","20.2","%","","","(1.7",")%"]]
[[/GREPCENT_TABLE]]

Direct
cost of revenues as a percentage of revenues decreased 170 basis points in fiscal 2021 compared to fiscal 2020 primarily because of a
decrease in direct cost of revenues as a percentage of revenues in the United States. net2phone-UCaaS’ 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 increased in fiscal 2021 compared to fiscal 2020 primarily
due to increases in employee compensation and sales commissions. As a percentage of net2phone-UCaaS’ revenues, net2phone-UCaaS’
selling, general and administrative expenses decreased to 102.4% from 114.3% in fiscal 2021 and fiscal 2020, respectively.

Depreciation
and Amortization. The increase in depreciation and amortization expense in fiscal 2021 compared to fiscal 2020 was due to increased
depreciation of net2phone-UCaaS’ telephone equipment leased to customers and increased depreciation of capitalized costs of consultants
and employees developing internal use software.

Other
Operating Expense, net. Other operating expense, net in fiscal 2021 was due to the settlement of a legal matter. Other operating
expense, net in fiscal 2020 was due to the write-off of certain capitalized assets related to a cancelled project.

Traditional
Communications Segment

The
Traditional Communications segment, which represented 91.8% and 93.2% of our total revenues in fiscal 2021 and fiscal 2020, respectively,
includes Mobile Top-Up, which enables customers to transfer airtime and bundles of airtime, messaging, and data to international and
domestic mobile accounts, BOSS Revolution Calling, an international long-distance calling service marketed primarily to immigrant communities
in the United States and Canada, and Carrier Services, a wholesale provider of international voice and SMS termination and outsourced
traffic management solutions to telecoms worldwide. Traditional Communications also includes net2phone-Platform Services, which provides
telephony services to cable operators and other offerings that leverage a common technology platform, as well as smaller communications
and payments offerings, many in harvest mode. Most of the Traditional Communications segment was previously included in our Telecom &
Payment Services segment except for net2phone-Platform Services, which was previously included in our net2phone segment.

Traditional
Communications’ most significant revenue streams are from Mobile Top-Up, BOSS Revolution Calling, and Carrier Services. Mobile
Top-Up and BOSS Revolution Calling are sold direct-to-consumers and through distributors and retailers. We receive payments for BOSS
Revolution Calling, traditional calling cards, and Mobile Top-Up 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.

37

[[GREPCENT_TABLE]]
[["(in millions)","","","","","Change"],["Year ended July 31","","2021","","","2020","","","$/#","","","%"],["Revenues:"],["Mobile Top-Up","","$","461.6","","","$","334.4","","","$","127.2","","","","38.0","%"],["BOSS Revolution Calling","","","455.2","","","","468.3","","","","(13.1",")","","","(2.8",")"],["Carrier Services","","","361.0","","","","394.3","","","","(33.3",")","","","(8.5",")"],["Other","","","50.9","","","","57.1","","","","(6.2",")","","","(10.8",")"],["Total revenues","","","1,328.7","","","","1,254.1","","","","74.6","","","","6.0"],["Direct cost of revenues","","","(1,119.8",")","","","(1,058.4",")","","","(61.4",")","","","(5.8",")"],["Selling, general and administrative","","","(118.1",")","","","(134.1",")","","","16.0","","","","11.9"],["Depreciation and amortization","","","(11.0",")","","","(14.7",")","","","3.7","","","","25.6"],["Severance","","","(0.4",")","","","(3.5",")","","","3.1","","","","87.0"],["Other operating gain (expense), net","","","0.6","","","","(4.5",")","","","5.1","","","","112.6"],["Income from operations","","$","80.0","","","$","38.9","","","$","41.1","","","","105.4","%"],["Minutes of use:"],["BOSS Revolution Calling","","","3,554","","","","3,913","","","","(359",")","","","(9.2",")%"],["Carrier Services","","","10,511","","","","14,398","","","","(3,887",")","","","(27.0",")"]]
[[/GREPCENT_TABLE]]

Revenues.
Revenues from Mobile Top-Up increased in fiscal 2021 compared to fiscal 2020 primarily from product expansion and continued growth
across all of our distribution channels, including the addition of a business-to-business channel in fiscal 2021. The business-to-business
channel was the main driver for Mobile Top-Up’s revenue increase in the fourth quarter of fiscal 2021. In addition, our acquisition
of a mobile top-up company in December 2020 contributed to our increased penetration into the market in Africa.

Revenues
and minutes of use from BOSS Revolution Calling decreased in fiscal 2021 compared to fiscal 2020 although COVID-19 related demand in
fiscal 2021 slowed the rate of decline in BOSS Revolution Calling revenue that we have experienced in recent periods. BOSS Revolution
Calling 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
and minutes of use from Carrier Services decreased in fiscal 2021 compared to fiscal 2020 as communications globally continued 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 Carrier Services 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 increased in fiscal 2021 compared to fiscal 2020 primarily due to increases in Mobile Top-Up’s
direct cost of revenues in fiscal 2021 compared to fiscal 2020 as a result of the increase in its revenues, partially offset by decreases
in Carrier Services’ and BOSS Revolution Calling’s direct cost of revenues in fiscal 2021 compared to fiscal 2020.

[[GREPCENT_TABLE]]
[["Year ended July 31","","2021","","","2020","","","Change"],["Direct cost of revenues as a percentage of revenues","","","84.3","%","","","84.4","%","","","(0.1",")%"]]
[[/GREPCENT_TABLE]]

Direct
cost of revenues as a percentage of revenues decreased 10 basis points in fiscal 2021 compared to fiscal 2020 because of decreases in
direct cost of revenues as a percentage of revenues in Mobile Top-Up and BOSS Revolution Calling in fiscal 2021 compared to fiscal 2020,
mostly offset by an increase in direct cost of revenues as a percentage of revenues in Carrier Services in fiscal 2021 compared to fiscal
2020. The decreases in direct cost of revenues as a percentage of revenues in Mobile Top-Up and BOSS Revolution Calling were primarily
due to the continued migration of customers to our digital platforms. The increased adoption of our digital, direct-to-consumer channels
is expected to continue, which is expected to contribute to future reductions in direct cost of revenues as a percentage of revenues.

Selling,
General and Administrative. Selling, general and administrative expense decreased in fiscal 2021 compared to fiscal 2020 primarily
due to decreases in employee compensation, stock-based compensation, marketing expense, and bad debt expense, partially offset by an
increase in debit and credit card processing charges. The increases in card processing charges were the result of the shift in the sales
of our consumer offerings from cash transactions at retailers to credit and debit card transactions through our BOSS Revolution Calling
app and other digital channels. As a percentage of Traditional Communications’ revenue, Traditional Communications’ selling,
general and administrative expense decreased to 8.9% from 10.7% in fiscal 2021 and fiscal 2020, respectively.

38

Depreciation
and Amortization. Depreciation and amortization expense decreased in fiscal 2021 compared to fiscal 2020 as more of our property,
plant, and equipment became fully depreciated, partially offset by depreciation of equipment added to our telecommunications network
and capitalized costs of consultants and employees developing internal use software.

Severance
Expense. We incurred severance expense of $0.4 million and $3.5 million in fiscal 2021 and fiscal 2020, respectively.

Other
Operating Gain (Expense), net. Other operating gain (expense), net in fiscal 2021 included a gain of $2.0 million received from the
sale to a third party of all our rights under the Payment Card Interchange Fee and Merchant Discount Antitrust Litigation. The lawsuit
is about claims that merchants paid excessive fees to accept Visa and Mastercard cards between January 1, 2004 and January 25, 2019 because
Visa and Mastercard, individually, and together with their respective member banks, violated the antitrust laws. Other operating gain
(expense), net also included expense for the indemnification of a net2phone cable telephony customer related
to patent infringement claims brought against the customer of $0.5 million and $1.2 million in fiscal 2021 and fiscal 2020, respectively.
Other operating gain (expense), net in fiscal 2021 also included expense for a settlement of a Carrier Services’ claim for $0.6
million and other expense of $0.3 million. In addition, other operating gain (expense), net in fiscal 2020 included an accrual for non-income
related taxes related to one of our foreign subsidiaries of $2.2 million, a write-off of $0.6 million for certain assets primarily in
Latin America, and expense of $0.5 million for a legal matter.

Corporate

[[GREPCENT_TABLE]]
[["(in millions)","","","","","","","","Change"],["Year ended July 31","","2021","","","2020","","","$","","","%"],["General and administrative expenses","","$","(7.5",")","","$","(9.1",")","","$","1.6","","","","16.6","%"],["Depreciation and amortization","","","(0.1",")","","","(0.1",")","","","\u2014","","","","(64.4",")"],["Other operating gain (expense), net","","","0.2","","","","(0.5",")","","","0.7","","","","142.4"],["Loss from operations","","$","(7.4",")","","$","(9.7",")","","$","2.3","","","","23.5","%"]]
[[/GREPCENT_TABLE]]

Corporate
costs 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, charitable contributions, travel, 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 decreased in fiscal 2021 compared to fiscal 2020 primarily because
of a decrease in stock-based compensation due to reductions in expense of deferred stock units granted in June 2019 and stock options,
as well as a decrease in employee compensation. As a percentage of our consolidated revenues, Corporate general and administrative expense
was 0.5% and 0.7% in fiscal 2021 and fiscal 2020, respectively.

Other
Operating Gain (Expense), net. As discussed in Note 22 to the Consolidated Financial Statements included in Item 8 to Part II of
this Annual Report, we (as well as other defendants) have been named in a pending putative class action on behalf of Straight Path’s
stockholders and a derivative complaint. We incurred legal fees of $2.9 million and $3.6 million in fiscal 2021 and fiscal 2020, respectively,
related to this action. Also, we recorded offsetting gains from insurance claims for this matter of $3.1 million and $3.1 million in
fiscal 2021 and fiscal 2020, respectively.

Consolidated

The
following is a discussion of certain of our consolidated expenses, and our consolidated income and expense line items below income from
operations.

Related
Party Lease Costs. We lease office and parking space in Rafael Holdings’ building and parking garage located at 520 Broad St,
Newark, New Jersey. We also lease office space in Israel from Rafael Holdings. The Newark lease expires in April 2025 and the Israel
lease expires in July 2025. In both fiscal 2021 and fiscal 2020, we incurred lease costs of $1.9 million in connection with the Rafael
Holdings’ leases, which is included in consolidated selling, general and administrative expenses.

39

Stock-Based
Compensation Expense. Stock-based compensation expense included in consolidated selling, general and administrative expenses was
$1.5 million and $3.9 million in fiscal 2021 and fiscal 2020, respectively. The decrease in stock-based compensation expense in fiscal
2021 compared to fiscal 2020 was primarily due to reductions in expense of deferred stock units granted in June 2019 and stock options.
At July 31, 2021, unrecognized compensation cost related to non-vested stock-based compensation was an aggregate of $0.6 million. The
unrecognized compensation cost is expected to be recognized over the remaining vesting period that ends in fiscal 2024.

[[GREPCENT_TABLE]]
[["(in millions)","","","","","Change"],["Year ended July 31","","2021","","","2020","","","$","","","%"],["Income from operations","","$","57.0","","","$","17.9","","","$","39.1","","","","217.6","%"],["Interest income, net","","","0.3","","","","1.1","","","","(0.8",")","","","(69.5",")"],["Other income (expense), net","","","7.9","","","","(1.3",")","","","9.2","","","","724.8"],["Benefit from income taxes","","","31.7","","","","3.7","","","","28.0","","","","755.9"],["Net income","","","96.9","","","","21.4","","","","75.5","","","","352.4"],["Net (income) loss attributable to noncontrolling interests","","","(0.4",")","","","\u2014","","","","(0.4",")","","","nm"],["Net income attributable to IDT Corporation","","$","96.5","","","$","21.4","","","$","75.1","","","","350.2","%"]]
[[/GREPCENT_TABLE]]

nm—not
meaningful

Other
Income (Expense), net. Other income (expense), net consists of the following:

[[GREPCENT_TABLE]]
[["(in millions) Year ended July 31","","2021","","","2020"],["Foreign currency transaction gains","","$","1.0","","","$","0.4"],["Equity in the net loss of investee","","","(1.1",")","","","\u2014"],["Write-off of tax assets related to prior periods","","","\u2014","","","","(1.3",")"],["Gain (loss) on investments","","","8.8","","","","(0.3",")"],["Other","","","(0.8",")","","","(0.1",")"],["TOTAL","","$","7.9","","","$","(1.3",")"]]
[[/GREPCENT_TABLE]]

On
February 2, 2021, we paid $4.0 million to purchase shares of series B convertible preferred stock of a communications company (the equity
method investee, or EMI). The shares purchased represent 23.95% of the outstanding shares of the EMI on an as converted basis. We account
for this investment using the equity method since the series B convertible preferred stock is in-substance common stock, and we can exercise
significant influence over the operating and financial policies of the EMI. We determined that on the date of the acquisition, there
was a difference of $3.4 million between our investment in the EMI and our proportional interest in the equity of the EMI, which represented
our share of the EMI’s customer list on the date of acquisition. This basis difference is being amortized over the 6-year estimated
life of the customer list.

The
gain on investments in fiscal 2021 is primarily from appreciation of shares of Rafael Holdings Class B common stock, partially offset
by unrealized losses on hedge funds.

Income
Taxes. In fiscal 2021, we released $46.5 million of our valuation allowance on the portion of our deferred income tax assets that
we are more likely than not going to utilize. This release was mostly related to domestic deferred income tax assets. We used the framework
of ASC Income Taxes (Topic 740) to determine whether the valuation allowance should be maintained or reversed. We considered the
scheduled expiration of our net operating losses included in our deferred tax assets, projected future taxable income, and tax planning
strategies in our assessment of the valuation allowance. The primary factors that resulted in the valuation allowance release were the
three consecutive years of profitability in the United States and expected future profitability in both the United States and the United
Kingdom that will utilize a significant portion of the net operating losses. Our tax planning strategies were not a significant factor
in the analysis. In fiscal 2020, due to taxable income in the United States, we utilized deferred tax assets and released the corresponding
valuation allowance to offset income tax expense of $3.5 million. In addition, in fiscal 2020, we released an additional $8.4 million
of the valuation allowance on the portion of the deferred tax assets that we are more likely than not going to utilize because we forecasted
future profitability in the United States. The increase in income tax expense in fiscal 2021 compared to fiscal 2020, excluding the benefits
from the valuation allowance released in fiscal 2021 and fiscal 2020, was primarily due to differences in the amount of taxable income
earned in the various taxing jurisdictions.

40

Net
(Income) Loss Attributable to Noncontrolling Interests. The change in the net (income) loss attributable to noncontrolling interests
in fiscal 2021 compared to fiscal 2020 was due to the reduction in the net loss of NRS, as well as new noncontrolling interests in fiscal
2021. In fiscal 2021, we acquired an aggregate of 75% of the issued shares of a company that provides a digital platform facilitating
supply and distribution of mobile airtime and data top-ups and other services across borders. As of May 31, 2021, we entered into a Warrant
Purchase Agreement with the shareholders of a variable interest entity, or VIE, that operates money transfer businesses. We have various
management rights and protective provisions pursuant to the Warrant Purchase Agreement. Primarily as a result of the Warrant Purchase
Agreement, we can obtain 90% of the ownership interests in the VIE. We consolidated the VIE as of May 31, 2021 because we determined
that we are the primary beneficiary of the VIE since we have the power to direct the activities of the VIE that most significantly impact
its economic performance, and we have the obligation to absorb losses of and the right to receive benefits from the VIE that could potentially
be significant to it. We do not currently own any interest in the VIE and thus the net income incurred by the VIE was attributed to noncontrolling
interests. Finally, on December 31, 2020, the previously approved compensatory arrangement with each of Howard S. Jonas, the Chairman
of our Board of Directors, and Shmuel Jonas, our Chief Executive Officer, was finalized. Howard S. Jonas and Shmuel Jonas each received
fifty restricted shares of net2phone 2.0, Inc., or net2phone 2.0, Class B common stock, which represents 5% of the outstanding common
stock of net2phone 2.0. net2phone 2.0 owns and operates our net2phone-UCaaS segment.

LIQUIDITY
AND CAPITAL RESOURCES

As
of the date of this Annual Report, including the impact of COVID-19, we currently expect our cash from operations and the balance of
cash, cash equivalents, debt securities, and current equity investments that we held on July 31, 2021 will be sufficient to meet our
currently anticipated working capital and capital expenditure requirements during fiscal 2022.

At
July 31, 2021, we had cash, cash equivalents, debt securities, and unrestricted current equity investments of $161.4 million and working
capital (current assets in excess of current liabilities) of $48.8 million.

We
treat unrestricted cash and cash equivalents held by IDT Payment Services as substantially restricted and unavailable for other purposes.
At July 31, 2021, “Cash and cash equivalents” in our consolidated balance sheet included an aggregate of $15.3 million held
by IDT Payment Services that was unavailable for other purposes.

[[GREPCENT_TABLE]]
[["(in millions) Year ended July 31","","2021","","","2020"],["Cash flows provided by (used in):"],["Operating activities","","$","66.6","","","$","(29.6",")"],["Investing activities","","","(44.1",")","","","(32.5",")"],["Financing activities","","","(4.5",")","","","(5.6",")"],["Effect of exchange rate changes on cash, cash equivalents, and restricted cash and cash equivalents","","","7.7","","","","11.7"],["Increase (decrease) in cash, cash equivalents, and restricted cash and cash equivalents","","$","25.7","","","$","(56.0",")"]]
[[/GREPCENT_TABLE]]

Operating
Activities

Our
cash flows from operations vary significantly from quarter to quarter and from year to year, depending on our operating results and the
timing of operating cash receipts and payments, specifically trade accounts receivable and trade accounts payable.

Gross
trade accounts receivable increased to $51.1 million at July 31, 2021 from $50.3 million at July 31, 2020 primarily due to amounts billed
during fiscal 2021 that were greater than collections in fiscal 2021.

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 increased to $42.3 million at July 31, 2021 from $40.1 million at July 31, 2020 primarily due to an increase in the BOSS Revolution
Calling deferred revenue balance.

Customer
deposit liabilities at IDT Financial Services Limited, our Gibraltar-based bank, decreased to $115.5 million at July 31, 2021 from $116.0
million at July 31, 2020. Our restricted cash and cash equivalents included $115.8 million and $116.3 million at July 31, 2021 and 2020,
respectively, held by the bank.

On
December 21, 2020, we received $2.0 million from the sale to a third party of all our rights under the Payment Card Interchange Fee and
Merchant Discount Antitrust Litigation. The lawsuit is about claims that merchants paid excessive fees to accept Visa and Mastercard
cards between January 1, 2004 and January 25, 2019 because Visa and Mastercard, individually, and together with their respective member
banks, violated the antitrust laws.

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. We have evaluated our state tax filings with respect to the Wayfair decision
and are in the process of reviewing our remittance practices. 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.

41

Investing
Activities

Our
capital expenditures were $16.8 million in fiscal 2021 compared to $16.0 million in fiscal 2020. We currently anticipate that total capital
expenditures in fiscal 2022 will be $18 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.

On
December 3, 2020, our subsidiary IDT International Telecom, Inc., or IDTIT, acquired 51% of the issued shares of a company for $2.4 million,
net of cash acquired. We also recorded $0.4 million for the estimated fair value of contingent consideration. The contingent consideration
of $0.5 million will be paid (a) no later than November 30, 2021 if the acquired company generates EBITDA (as defined in the purchase
agreement) of no less than $1.0 million between October 1, 2020 and September 30, 2021; or (b) no later than November 30, 2022 if the
acquired company generates EBITDA of no less than $1.0 million between October 1, 2021 and September 30, 2022. Also, pursuant to a Put/Call
Option Agreement related to the 5% of the issued shares of the acquired company that the seller did not initially sell to IDTIT, or the
Option Shares, the seller exercised its option and on March 22, 2021, IDTIT purchased the Option Shares for $0.3 million. On June 15,
2021, IDTIT purchased 19% of the issued shares of the acquired company from the remaining noncontrolling interest holder for $1.0 million.
We also recorded $0.2 million for the estimated fair value of contingent consideration. The contingent consideration of up to $0.3 million
will be paid if the acquired company meets certain Adjusted EBITDA targets (as defined in the purchase agreement) no later than April
1, 2023.

On
December 11, 2019, our subsidiary, net2phone, Inc. acquired 100% of the outstanding shares of Ringsouth Europa, S.L., a regional provider
of cloud communications services to businesses in Spain. The cash paid for the acquisition was $0.5 million. We also recorded $0.4 million
for the estimated fair value of contingent consideration. The contingent consideration includes two potential payments to the seller
of $0.4 million each, based on monthly recurring revenue targets to be achieved over a 36-month period and 48-month period. The second
potential payment is not contingent upon meeting the target for the first payment.

On
September 29, 2021, NRS sold 862,442 shares of its Class B common stock, which represents 2.5% of its outstanding capital stock on a
fully diluted basis, to Alta Fox Opportunities Fund LP, or Alta Fox, for cash of $10 million. Alta Fox has the right to request redemption
of all or any portion of the NRS common shares that it purchased at the per share purchase price during a period of 182 days following
the fifth anniversary of this transaction. The redemption right shall terminate upon the consummation of (i) a sale of NRS or its assets
for cash or securities that are listed on a national securities exchange, (ii) a public offering of NRS’ securities, or (iii) a
distribution of NRS’ capital stock following which NRS’ common shares are listed on a national securities exchange.

As
of May 31, 2021, we purchased a warrant from the shareholders of a VIE for cash of $0.8 million, which is included in financing activities,
and a contingent payment of $0.1 million. We acquired cash of $3.3 million from the initial consolidation of the VIE, which is included
in investing activities.

On
December 7, 2020, we purchased from Rafael Holdings 218,245 newly issued shares of Rafael Holding’s Class B common stock and a
warrant to purchase up to 43,649 shares of Rafael Holding’s Class B common stock at an exercise price of $22.91 at any time on
or after December 7, 2020 and on or prior to June 6, 2022. The aggregate purchase price was $5.0 million. The purchase price was based
on a per share price of $22.91, which was the closing price of Rafael Holding’s Class B common stock on the New York Stock Exchange
on the trading day immediately preceding the purchase date. On March 15, 2021, we exercised the warrant in full and purchased 43,649
shares of Rafael Holding’s Class B common stock for cash of $1.0 million.

On
February 2, 2021, we paid $4.0 million to purchase shares of the EMI’s series B convertible preferred stock representing 23.95%
of the outstanding shares of the EMI on an as converted basis. On August 10, 2021, we paid $1.1 million to purchase shares of the EMI’s
series C convertible preferred stock and additional shares of the EMI’s series B convertible preferred stock. These purchases increased
our ownership of the EMI’s outstanding shares to 26.57% on an as converted basis.

Purchases
of debt securities and equity investments were $43.2 million and $22.4 million in fiscal 2021 and fiscal 2020, respectively. Proceeds
from maturities and sales of debt securities and redemptions of equity investments were $26.2 million and $6.5 million in fiscal 2021
and fiscal 2020, respectively.

42

Financing
Activities

We
distributed cash of $0.9 million and $0.9 million in fiscal 2021 and fiscal 2020, respectively, to the noncontrolling interests in certain
of our subsidiaries.

In
fiscal 2021 and fiscal 2020, we received proceeds from financing-related other liabilities of $0.7 million and nil, respectively.

In
fiscal 2021 and fiscal 2020, we repaid financing-related other liabilities of $0.1 million and $0.5 million, respectively.

On
April 20, 2020, our subsidiary, IDT Domestic Telecom, Inc., or IDT DT, received loan proceeds of
$10.0 million from TD Bank, N.A., pursuant to the Paycheck Protection Program, or the PPP Loan, under the
Coronavirus Aid, Relief, and Economic Security Act, or CARES Act, administered by the U.S. Small Business Administration. On April
29, 2020, IDT DT returned all $10.0 million in proceeds from the PPP Loan.

In
fiscal 2021 and fiscal 2020, we received proceeds from the exercise of stock options of $0.7 million and $0.3 million, respectively,
for which we issued 81,041 and 32,551 shares, respectively, of our Class B common stock.

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. IDT Telecom may use the proceeds to finance working capital requirements
and for certain closing costs of the facility. At July 31, 2021, IDT Telecom had not borrowed any amounts under this facility. The revolving
credit facility is secured by primarily all of IDT Telecom’s assets. The principal outstanding bears interest per annum at the
Intercontinental Exchange Benchmark Administration Ltd. LIBOR multiplied by the Regulation D maximum reserve requirement plus 125 to
175 basis points, depending upon IDT Telecom’s leverage ratio as computed for the most recent fiscal quarter. Interest is payable
monthly, and all outstanding principal and any accrued and unpaid interest is due in May 2024. IDT Telecom pays a quarterly unused commitment
fee on the average daily balance of the unused portion of the $25.0 million commitment of 30 to 85 basis points, depending upon IDT Telecom’s
leverage ratio as computed for the most recent fiscal quarter. 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 July
31, 2021, IDT Telecom was in compliance with all of the covenants.

IDT
Telecom had a credit agreement, dated as of October 31, 2019, with TD Bank, N.A. for a revolving credit facility for up to a maximum
principal amount of $25.0 million until its maturity on July 15, 2020. The principal outstanding incurred interest per annum at the LIBOR
rate adjusted by the Regulation D maximum reserve requirement plus 125 basis points. In fiscal 2020, we borrowed and repaid an aggregate
of $1.4 million under the facility. IDT Telecom paid a quarterly unused commitment fee of 0.3% per annum on the average daily balance
of the unused portion of the $25.0 million commitment.

We
have an existing stock repurchase program authorized by our Board of Directors for the repurchase of shares of our Class B common stock.
The Board of Directors authorized the repurchase of up to 8.0 million shares in the aggregate. In fiscal 2021, we repurchased 463,792
shares of Class B common stock for an aggregate purchase price of $2.8 million. In fiscal 2020, we repurchased 671,117 shares of our
Class B common stock for an aggregate purchase price of $4.2 million. At July 31, 2021, 5.8 million shares remained available for repurchase
under the stock repurchase program.

In
fiscal 2021 and fiscal 2020, we paid $1.3 million and $0.3 million, respectively, to repurchase 109,381 and 37,348 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 awards of deferred stock units and restricted stock. Such shares are repurchased by us based on their
fair market value on the trading day immediately prior to the vesting date.

Other
Sources and Uses of Resources

We
are considering spin-offs, sales of equity, and other potential dispositions of certain of our subsidiaries. Some of the transactions
under consideration are in early stages and others are more advanced. 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. The sale of a subsidiary’s equity in an initial public offering or other transaction would instead be a source
of cash. In fiscal 2021, we announced that our Board of Directors had directed us to prepare for the potential spin-off of our net2phone
cloud communications business. Management subsequently has stated that it expects the preparations will be complete by the end of calendar
year 2021 or shortly thereafter. There is no assurance at this time that any of these transactions will be completed.

We
intend to, where appropriate, make other 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. At this time, 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.

43

CONTRACTUAL
OBLIGATIONS AND OTHER COMMERCIAL COMMITMENTS

The
following table quantifies our future contractual obligations and other commercial commitments at July 31, 2021:

Payments
Due by Period

[[GREPCENT_TABLE]]
[["(in millions)","","Total","","","Less than 1 year","","","1\u20143 years","","","4\u20145 years","","","After 5 years"],["Purchase commitments","","$","3.7","","","$","3.7","","","$","\u2014","","","$","\u2014","","","$","\u2014"],["Connectivity obligations under service agreements","","","0.8","","","","0.7","","","","0.1","","","","\u2014","","","","\u2014"],["Operating leases including short-term leases","","","8.9","","","","3.2","","","","4.3","","","","1.4","","","","\u2014"],["TOTAL CONTRACTUAL OBLIGATIONS(1)","","$","13.4","","","$","7.6","","","$","4.4","","","$","1.4","","","$","\u2014"]]
[[/GREPCENT_TABLE]]

[[GREPCENT_TABLE]]
[["","(1)","The above table does not include an aggregate of $19.6 million in performance bonds and $1.7 million in potential contingent consideration related to business acquisitions due to the uncertainty of the amount and/or timing of any such payments."]]
[[/GREPCENT_TABLE]]

OFF-BALANCE
SHEET ARRANGEMENTS

We
do not have any “off-balance sheet arrangements,” as defined in relevant SEC regulations that are reasonably likely to have
a current or future effect on our financial condition, results of operations, liquidity, capital expenditures or capital resources, other
than the following.

In
connection with our spin-off of Straight Path in July 2013, we and Straight Path entered into various agreements prior to the spin-off
including a Separation and Distribution Agreement to effect the separation and provide a framework for our relationship with Straight
Path after the spin-off, and a Tax Separation Agreement, which sets forth the responsibilities of us and Straight Path with respect to,
among other things, liabilities for federal, state, local, and foreign taxes for periods before and including the spin-off, the preparation
and filing of tax returns for such periods and disputes with taxing authorities regarding taxes for such periods. Pursuant to the Separation
and Distribution Agreement, we indemnify Straight Path and Straight Path indemnifies us for losses related to the failure of the other
to pay, perform or otherwise discharge, any of the liabilities and obligations set forth in the agreement. Pursuant to the Tax Separation
Agreement, we indemnify Straight Path from all liability for taxes of Straight Path or any of its subsidiaries or relating to the Straight
Path business with respect to taxable periods ending on or before the spin-off, from all liability for taxes of ours, other than Straight
Path and its subsidiaries, for any taxable period, and from all liability for taxes due to the spin-off. (see Note 22 to the Consolidated
Financial Statements included in Item 8 to Part II of this Annual Report).

We
have performance bonds issued through third parties for the benefit of various states in order to comply with the states’ financial
requirements for money remittance licenses and telecommunications resellers. At July 31, 2021, we had aggregate performance bonds of
$19.6 million outstanding.