# IDT CORP (IDT) FY 2023 MD&A

Verbatim Item 7 Management's Discussion and Analysis from IDT CORP's 10-K for fiscal year 2023.

SEC filing source: https://www.sec.gov/Archives/edgar/data/1005731/000149315223037384/form10-k.htm
Accession: 0001493152-23-037384
Filing date: 2023-10-16
Report date: 2023-07-31
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/
Previous year: /company/IDT/mda/fy2022/ (FY 2022)
Next year: /company/IDT/mda/fy2024/ (FY 2024)

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.

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 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 doubtful accounts receivable,
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:

[[GREPCENT_TABLE]]
[["(in millions) July 31","","2023","","","2022"],["Retail Communications","","$","11.2","","","$","11.1"],["net2phone","","","9.9","","","","9.7"],["Fintech","","","3.2","","","","3.2"],["IDT Digital Payments","","","2.2","","","","2.4"],["TOTAL","","$","26.5","","","$","26.4"]]
[[/GREPCENT_TABLE]]

For
our annual goodwill impairment tests as of May 1, 2023 and 2022, 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. In addition, we do not believe we are currently at risk of goodwill impairment. Our
qualitative assessments considered several factors including (i) the business enterprise value of the reporting unit from the last quantitative
test at May 1, 2020 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.

44

For
our quantitative assessment, we calculate the fair value of the reporting unit using a discounted cash flow method as a form of the income
approach, and a market approach that incorporates comparative multiples to corroborate discounted cash flow results. 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 use a discount rate based on the weighted-average cost of capital
of comparable companies by Standard Industrial Classification, or SIC, code that represents our estimate of the expected return a marketplace
participant would have required.

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, estimates of future levels of gross and operating profits and capital expenditures, and
the selection of comparable companies for the market approach. 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:

[[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 2023 or fiscal 2022. 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 Doubtful Accounts Receivable

Our
allowance for doubtful accounts was $5.6 million at July 31, 2023 and $5.3 million at July 31, 2022. The allowance for doubtful accounts
as a percentage of gross trade accounts receivable increased to 15.0% at July 31, 2023 from 11.9% at July 31, 2022 because, at July 31,
2023 compared to July 31, 2022, gross trade accounts receivable decreased 15.9% and the allowance for doubtful accounts increased 5.9%.
The most significant decrease in the gross trade accounts receivable balance at July 31, 2023 compared to July 31, 2022 was in IDT Digital
Payments.

We
estimated 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 included separately providing for customer receivables based on specific circumstances
and credit conditions, and when it was deemed probable that the balance was uncollectible. Account balances are written off against the
allowance when it is determined that the receivable will not be recovered.

On
August 1, 2023, we adopted Accounting Standards Update, or ASU, No. 2016-13, Financial Instruments—Credit Losses (Topic 326),
Measurement of Credit Losses on Financial Instruments, that changed the impairment model for most financial assets and certain
other instruments. Effective with the adoption of ASU 2016-13, we will record an expense based on a forward-looking current expected
credit loss model to maintain an allowance for credit losses. When determining the allowance for trade accounts receivable, we will consider
the probability of recoverability of accounts receivable based on past experience, taking into account current collection trends and
general economic factors, including bankruptcy rates. We will also consider future economic trends to estimate expected credit losses
over the lifetime of the asset. Credit risks will be 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.

45

Our
allowance for credit losses estimates 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 income tax, sales tax,
and regulatory agency laws, rules, or regulations.

The
valuation allowance on our deferred income tax assets was $10.6 million and $11.6 million at July 31, 2023 and 2022, respectively. In
fiscal 2023, we decreased the valuation allowance by $1.0 million, which included a decrease of $2.8 million due to the utilization or
disposal of previously valued deferred income tax assets and a release of $0.7 million for profitability in the United Kingdom, net of
an establishment of $2.5 million for deferred income tax assets that were not more likely than not going to be utilized prior to expiration.
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.

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

Our
2017 FCC Form 499-A, which reports our calendar year 2016 revenue, was audited by the USAC. The Internal Audit Division of USAC issued
preliminary audit findings and, in accordance with USAC’s audit procedures, we appealed certain of the findings. USAC issued a
final decision, and the final decision overturned one of the initial findings but left the remaining initial findings in place. The reversal
will result in the elimination of a $1.8 million charge by the Universal Service Fund. The final decision upheld the imposition of a
$2.9 million charge to the Federal Telecommunications Relay Service, or TRS, Fund. We have appealed the USAC’s final decision to
the FCC and we do not intend to remit payment for the TRS Fund 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, 2023 and 2022, our accrued expenses included $26.8 million and $33.2 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 2022, the Financial Accounting Standards Board issued ASU No. 2022-03, Fair Value Measurement (Topic 820), Fair Value
Measurement of Equity Securities Subject to Contractual Sale Restrictions, that clarifies that a contractual restriction on the sale
of an equity security is not considered part of the unit of account of the equity security and, therefore, is not considered in measuring
fair value. The ASU also requires specific disclosures related to equity securities that are subject to contractual sales restrictions.
We will adopt the amendments in this ASU prospectively on August 1, 2024. We are evaluating the impact that this ASU will have on our
consolidated financial statements.

RESULTS
OF OPERATIONS

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

46

COVID-19

In
May 2023, the World Health Organization declared an end to COVID-19 as a public health emergency. As of the date of this Annual Report,
we continue to monitor the situation. We cannot predict with certainty the potential impact of COVID-19 if it re-invigorates on our results
of operations, financial condition, or 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 10.8%, 12.5%, and 14.5%
of our consolidated revenues in fiscal 2023, fiscal 2022, and fiscal 2021, respectively. Our customers with the five largest receivables
balance collectively accounted for 16.7% and 27.1% of our consolidated gross trade accounts receivable at July 31, 2023 and 2022, 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 receivable
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
IDT Global 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 IDT Global customers with receivable balances that exceed our applicable
payables in order to maximize the offset and reduce our credit risk.

Explanation
of Performance Metrics

Our
results of operations discussion include the following performance metrics:

[[GREPCENT_TABLE]]
[["","\u25a0","for NRS, active POS terminals, payment processing accounts, and recurring revenue,"]]
[[/GREPCENT_TABLE]]

[[GREPCENT_TABLE]]
[["","\u25a0","for net2phone, seats and subscription revenue, and"]]
[[/GREPCENT_TABLE]]

[[GREPCENT_TABLE]]
[["","\u25a0","for Traditional Communications, minutes of use."]]
[[/GREPCENT_TABLE]]

NRS
uses two key 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’ recurring revenue is NRS’ revenue in accordance with U.S. GAAP excluding its revenue
from POS terminal sales.

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

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

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

Year
Ended July 31, 2023 compared to Year Ended July 31, 2022 and Year Ended July 31, 2022 compared to Year Ended July 31, 2021

As
of July 31, 2023, we owned 90.0% of the outstanding shares of our subsidiary, net2phone 2.0, Inc., or net2phone 2.0, which owns and operates
the net2phone segment, and 80.0% of the outstanding shares of NRS, and, on a fully diluted basis assuming all the vesting criteria related
to various rights granted have been met and other assumptions, we would own 85.8% of net2phone 2.0 and 77.7% of NRS.

As
of August 1, 2022, we revised our reportable business segments primarily to reflect the growth of our financial technology businesses
and their increased contributions to our consolidated results. Our four reportable business segments, NRS, Fintech, net2phone, and Traditional
Communications, reflect management’s current approach to analyzing results, its resource allocation strategy, and its assessment
of business performance. NRS was previously included in our Fintech segment. In addition, certain lines of business were reclassified
to the Fintech segment from the Traditional Communications segment. Comparative segment information has been reclassified and restated
in all periods to conform to the current period presentation.

47

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","","2023","","","2022","","","2021"],["REVENUES:"],["National Retail Solutions","","","6.2","%","","","3.8","%","","","1.7","%"],["Fintech","","","7.0","","","","4.7","","","","4.0"],["net2phone","","","5.8","","","","4.3","","","","3.1"],["Traditional Communications","","","81.0","","","","87.2","","","","91.2"],["TOTAL REVENUES","","","100.0","","","","100.0","","","","100.0"],["COSTS AND EXPENSES:"],["Direct cost of revenues (exclusive of depreciation and amortization)","","","70.7","","","","75.8","","","","79.8"],["Selling, general and administrative","","","22.4","","","","18.4","","","","15.1"],["Depreciation and amortization","","","1.6","","","","1.3","","","","1.2"],["Severance","","","\u2014","","","","\u2014","","","","\u2014"],["TOTAL COSTS AND EXPENSES","","","94.7","","","","95.5","","","","96.1"],["Other operating (expense) gain, net","","","(0.4",")","","","(0.1",")","","","0.1"],["INCOME FROM OPERATIONS","","","4.9","","","","4.4","","","","4.0"],["Interest income, net","","","0.3","","","","\u2014","","","","\u2014"],["Other (expense) income, net","","","(0.3",")","","","(1.8",")","","","0.5"],["INCOME BEFORE INCOME TAXES","","","4.9","%","","","2.6","%","","","4.5","%"]]
[[/GREPCENT_TABLE]]

National
Retail Solutions Segment

NRS,
which represented 6.2%, 3.8%, and 1.7% of our total revenues in fiscal 2023, fiscal 2022, and fiscal 2021, respectively, is an operator
of a nationwide POS network providing independent retailers with store management software, electronic payment processing, and other
ancillary merchant services. NRS’ POS platform provides marketers with digital out-of-home advertising and transaction data.

[[GREPCENT_TABLE]]
[["(in millions)","","","","","","","","","","","2023 change from 2022","","","2022 change from 2021"],["Year ended July 31","","2023","","","2022","","","2021","","","$","","","%","","","$","","","%"],["Revenues:"],["Recurring","","$","71.4","","","$","45.3","","","$","19.7","","","$","26.1","","","","57.8","%","","$","25.6","","","","129.2","%"],["Other","","","5.7","","","","6.0","","","","5.0","","","","(0.3",")","","","(6.0",")","","","1.0","","","","20.8"],["Total revenues","","","77.1","","","","51.3","","","","24.7","","","","25.8","","","","50.3","","","","26.6","","","","107.3"],["Direct cost of revenues","","","(8.9",")","","","(7.1",")","","","(4.8",")","","","1.8","","","","25.5","","","","2.3","","","","47.1"],["Selling, general and administrative","","","(51.4",")","","","(32.1",")","","","(19.6",")","","","19.3","","","","60.3","","","","12.5","","","","63.3"],["Depreciation and amortization","","","(2.4",")","","","(0.9",")","","","(0.6",")","","","1.5","","","","160.9","","","","0.3","","","","74.3"],["Income (loss) from operations","","$","14.4","","","$","11.2","","","$","(0.3",")","","$","3.2","","","","28.5","%","","$","11.5","","","","nm"]]
[[/GREPCENT_TABLE]]

nm—not
meaningful

[[GREPCENT_TABLE]]
[["(in thousands)","","","","","","","","","","","2023 change from 2022","","","2022 change from 2021"],["July 31","","2023","","","2022","","","2021","","","#","","","%","","","#","","","%"],["Active POS terminals","","","25.7","","","","19.4","","","","14.0","","","","6.3","","","","32.6","%","","","5.4","","","","37.8","%"],["Payment processing accounts","","","15.8","","","","10.3","","","","5.9","","","","5.5","","","","52.9","%","","","4.4","","","","76.1","%"]]
[[/GREPCENT_TABLE]]

Revenues.
Revenues increased in each of fiscal 2023 and fiscal 2022 compared to the prior fiscal year driven primarily by revenue growth from
NRS’ merchant services and sales of advertising and data, as well as the expansion of NRS’ POS network.

Direct
Cost of Revenues. Direct cost of revenues increased in each of fiscal 2023 and fiscal 2022 compared to the prior fiscal year primarily
due to increases in the direct costs of NRS’ POS terminal sales.

48

Selling,
General and Administrative. Selling, general and administrative expense increased in each of fiscal 2023 and fiscal 2022 compared
to the prior fiscal year primarily due to increases in sales commissions, as well as increases in employee compensation. As a percentage
of NRS’ revenue, NRS’ selling, general and administrative expense was 66.7%, 62.5%, and 79.3% in fiscal 2023, fiscal 2022,
and fiscal 2021, respectively.

Depreciation
and Amortization. Depreciation and amortization expense increased in each of fiscal 2023 and fiscal 2022 compared to the prior fiscal
year primarily due to increased depreciation of capitalized costs of consultants and employees developing internal use software.

Fintech
Segment

Fintech,
which represented 7.0%, 4.7%, and 4.0% of our total revenues in fiscal 2023, fiscal 2022, and fiscal 2021, respectively, is comprised
of BOSS Money, a provider of international money remittance and related value/payment transfer services, as well as other, significantly
smaller, financial services businesses, including Leaf, a provider of digital wallet services in emerging markets, a variable interest
entity, or VIE, that operates money transfer businesses, and IDTFS, our Gibraltar-based bank.

[[GREPCENT_TABLE]]
[["(in millions)","","","","","","","","","","","2023 change from 2022","","","2022 change from 2021"],["Year ended July 31","","2023","","","2022","","","2021","","","$","","","%","","","$","","","%"],["Revenues:"],["BOSS Money","","$","76.9","","","$","55.6","","","$","49.3","","","$","21.3","","","","38.5","%","","$","6.3","","","","12.7","%"],["Other","","","9.7","","","","9.0","","","","8.3","","","","0.7","","","","7.2","","","","0.7","","","","8.8"],["Total revenues","","","86.6","","","","64.6","","","","57.6","","","","22.0","","","","34.1","","","","7.0","","","","12.1"],["Direct cost of revenues","","","(36.5",")","","","(26.1",")","","","(21.8",")","","","10.4","","","","40.0","","","","4.3","","","","19.7"],["Selling, general and administrative","","","(51.9",")","","","(43.1",")","","","(35.9",")","","","8.8","","","","20.3","","","","7.2","","","","20.2"],["Depreciation and amortization","","","(2.6",")","","","(2.2",")","","","(1.5",")","","","0.4","","","","20.2","","","","0.7","","","","47.3"],["Severance","","","\u2014","","","","(0.1",")","","","\u2014","","","","(0.1",")","","","(100.0",")","","","0.1","","","","nm"],["Other operating gain (expense)","","","1.9","","","","\u2014","","","","(0.3",")","","","(1.9",")","","","nm","","","","(0.3",")","","","(105.4",")"],["Loss from operations","","$","(2.5",")","","$","(6.9",")","","$","(1.9",")","","$","4.4","","","","63.4","%","","$","(5.0",")","","","(253.7",")%"]]
[[/GREPCENT_TABLE]]

nm—not
meaningful

Revenues.
Revenues from BOSS Money increased in each of fiscal 2023 and fiscal 2022 compared to the prior fiscal year primarily because of
increased transaction volume in BOSS Money’s direct-to-consumer digital and retail channels and, in fiscal 2023, from the development
and introduction of new platform functionalities enabling more flexible and granular pricing strategies. The revenue increase in fiscal
2022 compared to fiscal 2021was partially offset by the lack of revenue from transient foreign exchange market conditions that materially
improved BOSS Money’s revenues in fiscal 2021 but ceased by the end of the second quarter of fiscal 2021. BOSS Money continues
to benefit from ongoing expansion of its disbursement networks, particularly in Africa and the Caribbean.

Direct
Cost of Revenues. Direct cost of revenues increased in each of fiscal 2023 and fiscal 2022 compared to the prior fiscal year primarily
due to increased direct cost of revenues in BOSS Money’s direct-to-consumer digital and retail channels, which reflected the increases
in BOSS Money’s revenue.

Selling,
General and Administrative. Selling, general and administrative expense increased in fiscal 2023 compared to fiscal 2022 primarily
due to increases in debit and credit card processing charges, employee compensation, sales commissions, and marketing expenses. Selling,
general and administrative expense increased in fiscal 2022 compared to fiscal 2021 primarily due to increases in debit and credit card
processing charges, employee compensation, and sales commissions. The increases in card processing charges were the result of increased
credit and debit card transactions through our BOSS Money app and other digital channels. As a percentage of Fintech’s revenue,
Fintech’s selling, general and administrative expense was 59.9%, 66.8%, and 62.3% in fiscal 2023, fiscal 2022, and fiscal 2021,
respectively.

Depreciation
and Amortization. Depreciation and amortization expense increased in each of fiscal 2023 and fiscal 2022 compared to the prior fiscal
year primarily due to increased depreciation of capitalized costs of consultants and employees developing internal use software.

Other
Operating Gain (Expense). In fiscal 2023, we determined that the requirements for a portion of the contingent consideration payments
related to the Leaf acquisition would not be met. We recognized a gain of $1.6 million on the write-off of this contingent consideration
payment obligation. In addition, in fiscal 2023, fiscal 2022, and fiscal 2021, Leaf received payments of $0.4 million, $20,000, and nil,
respectively, from government grants for the development and commercialization of blockchain-backed financial technologies.

49

net2phone
Segment

The
net2phone segment, which represented 5.8%, 4.3%, and 3.1% of our total revenues in fiscal 2023, fiscal 2022, and fiscal 2021, respectively,
is comprised of net2phone’s cloud communications and contact center offerings.

[[GREPCENT_TABLE]]
[["(in millions)","","","","","","","","","","","2023 change from 2022","","","2022 change from 2021"],["Year ended July 31","","2023","","","2022","","","2021","","","$","","","%","","","$","","","%"],["Revenues:"],["Subscription","","$","66.8","","","$","53.6","","","$","38.8","","","$","13.2","","","","24.8","%","","$","14.8","","","","38.0","%"],["Other","","","5.6","","","","4.6","","","","5.7","","","","1.0","","","","20.3","","","","(1.1",")","","","(18.7",")"],["Total revenues","","","72.4","","","","58.2","","","","44.5","","","","14.2","","","","24.4","","","","13.7","","","","30.7"],["Direct cost of revenues","","","(12.0",")","","","(10.0",")","","","(8.7",")","","","2.0","","","","19.6","","","","1.3","","","","15.9"],["Selling, general and administrative","","","(57.4",")","","","(54.2",")","","","(46.1",")","","","3.2","","","","5.8","","","","8.1","","","","17.4"],["Depreciation and amortization","","","(5.6",")","","","(5.4",")","","","(5.1",")","","","0.2","","","","4.4","","","","0.3","","","","6.4"],["Severance","","","(0.1",")","","","\u2014","","","","\u2014","","","","0.1","","","","nm","","","","\u2014","","","","\u2014"],["Other operating (expense) gain, net","","","(0.1",")","","","0.3","","","","(0.1",")","","","0.4","","","","145.4","","","","(0.4",")","","","(393.2",")"],["Loss from operations","","$","(2.8",")","","$","(11.1",")","","$","(15.5",")","","$","8.3","","","","75.3","%","","$","4.4","","","","28.0","%"]]
[[/GREPCENT_TABLE]]

nm—not
meaningful

[[GREPCENT_TABLE]]
[["(in thousands)","","","","","","","","","","","2023 change from 2022","","","2022 change from 2021"],["July 31","","2023","","","2022","","","2021","","","#","","","%","","","#","","","%"],["Seats served","","","352","","","","291","","","","226","","","","61","","","","21.1","%","","","65","","","","28.4","%"]]
[[/GREPCENT_TABLE]]

Revenues.
net2phone’s revenues increased in each of fiscal 2023 and fiscal 2022 compared to the prior fiscal year driven primarily by
the growth in subscription revenue in the U.S. and Latin American markets, which reflects the increases in seats served at July 31, 2023
and July 31, 2022 compared to the prior fiscal year ends. The increase in seats served at July 31, 2022 compared to July 31, 2021 included
approximately 7,000 seats as a result of our acquisition of Integra in March 2022.

Direct
Cost of Revenues. Direct cost of revenues increased in fiscal 2023 compared to fiscal 2022 primarily due to the increase in revenues,
with the largest increase in the U.S. market. Direct cost of revenues increased in fiscal 2022 compared to fiscal 2021 primarily due
to the increase in revenues, with the largest increases in Latin American markets. net2phone’s focus on mid-sized businesses, multi-channel
strategies, and localized offerings generated revenue growth that exceeded the increase in direct cost of revenues.

Selling,
General and Administrative. Selling, general and administrative expense increased in fiscal 2023 compared to fiscal 2022 primarily
due to increases in sales commissions and consulting expense. Selling, general and administrative expense increased in fiscal 2022 compared
to fiscal 2021 primarily due to increases in sales commissions, employee compensation, and expenses related to the proposed (and subsequently
postponed) spin-off of our net2phone cloud communications business. As a percentage of net2phone’s revenues, net2phone’s
selling, general and administrative expense decreased to 79.2% from 93.1% and 103.7% in fiscal 2023, fiscal 2022, and fiscal 2021, respectively.

net2phone
derives a significant portion of its revenues from existing customers. Attracting new customers usually involves additional costs compared
to retention of existing customers. If existing customers’ subscriptions and related usage decrease or are terminated, net2phone
will need to spend more money to acquire new customers and still may not be able to maintain its existing level of revenues or profitability.
In addition, net2phone needs to acquire new customers to increase its revenues. net2phone incurs significant sales and marketing expenses
to acquire new customers. It is therefore expected that selling, general and administrative expense will remain a significant percentage
of net2phone’s revenues for the foreseeable future.

Depreciation
and Amortization. The increases in depreciation and amortization expense in each of fiscal 2023 and fiscal 2022 compared to the prior
fiscal year was due to increased depreciation of net2phone’s telephone equipment leased to customers and increased depreciation
of capitalized costs of consultants and employees developing internal use software.

Other
Operating (Expense) Gain, net. In fiscal 2023, we recorded an expense of $0.1 million for telephone equipment that was taken out
of service. In fiscal 2022, we determined that the requirements for a contingent consideration payment related to an acquisition in December
2019 would not be met before the expiration date. net2phone recognized a gain of $0.3 million on the write-off of this contingent consideration
payment obligation. Other operating expense, net in fiscal 2021 was due to the settlement of a legal matter.

50

Traditional
Communications Segment

The
Traditional Communications segment, which represented 81.0%, 87.2%, and 91.2% of our total revenues in fiscal 2023, fiscal 2022, and
fiscal 2021, respectively, includes IDT Digital Payments, 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 IDT Global, a wholesale provider of international voice and SMS
termination and outsourced traffic management solutions to telecoms worldwide. Traditional Communications also includes other small businesses
and offerings including early-stage business initiatives and mature businesses in harvest mode.

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

[[GREPCENT_TABLE]]
[["(in millions)","","","","","","","","","","","2023 change from 2022","","","2022 change from 2021"],["Year ended July 31","","2023","","","2022","","","2021","","","$/#","","","%","","","$/#","","","%"],["Revenues:"],["IDT Digital Payments","","$","417.1","","","$","473.2","","","$","461.6","","","$","(56.1",")","","","(11.9",")%","","$","11.6","","","","2.5","%"],["BOSS Revolution Calling","","","322.1","","","","387.9","","","","455.2","","","","(65.8",")","","","(17.0",")","","","(67.3",")","","","(14.8",")"],["IDT Global","","","230.3","","","","292.4","","","","361.0","","","","(62.1",")","","","(21.2",")","","","(68.6",")","","","(19.0",")"],["Other","","","33.2","","","","36.5","","","","42.3","","","","(3.3",")","","","(8.8",")","","","(5.8",")","","","(13.7",")"],["Total revenues","","","1,002.7","","","","1,190.0","","","","1,320.1","","","","(187.3",")","","","(15.7",")","","","(130.1",")","","","(9.9",")"],["Direct cost of revenues","","","(818.2",")","","","(991.2",")","","","(1,118.7",")","","","(173.0",")","","","(17.4",")","","","(127.5",")","","","(11.4",")"],["Selling, general and administrative","","","(107.0",")","","","(113.3",")","","","(109.3",")","","","(6.3",")","","","(5.5",")","","","4.0","","","","3.7"],["Depreciation and amortization","","","(9.4",")","","","(9.5",")","","","(10.6",")","","","(0.1",")","","","(1.0",")","","","(1.1",")","","","(10.1",")"],["Severance","","","(0.9",")","","","(0.1",")","","","(0.5",")","","","0.8","","","","nm","","","","(0.4",")","","","(87.5",")"],["Other operating (expense) gain, net","","","(5.9",")","","","(0.1",")","","","1.0","","","","5.8","","","","nm","","","","1.1","","","","110.6"],["Income from operations","","$","61.3","","","$","75.8","","","$","82.0","","","$","(14.5",")","","","(19.2",")%","","$","(6.2",")","","","(7.6",")%"],["Minutes of use:"],["BOSS Revolution Calling","","","2,299","","","","2,926","","","","3,554","","","","(627",")","","","(21.4",")%","","","(628",")","","","(17.7",")%"],["IDT Global","","","6,328","","","","7,720","","","","10,511","","","","(1,392",")","","","(18.0",")","","","(2,791",")","","","(26.6",")"]]
[[/GREPCENT_TABLE]]

Revenues.
Revenues from IDT Digital Payments decreased in fiscal 2023 compared to fiscal 2022 primarily from the deterioration of a key corridor
that was particularly impactful to revenues in the wholesale and retail channels. Revenues from IDT Digital Payments increased in fiscal
2022 compared to fiscal 2021 primarily from an increase in direct-to-consumer channel revenues, partially offset by a decrease in retail
channel revenues. Our acquisition of Sochitel in fiscal 2021 contributed to our increased penetration into the mobile top-up market in
Africa.

Revenues
and minutes of use from BOSS Revolution Calling decreased in each of fiscal 2023 and fiscal 2022 compared to the prior fiscal year. 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. In fiscal 2021, COVID-19-related demand slowed the rate of decline in BOSS Revolution Calling
revenue that we had experienced in prior periods. However, the COVID-19-related impact was less significant in fiscal 2022 than in fiscal
2021. The surge in demand for voice calls that began with the onset of the COVID-19 pandemic had eroded by the third quarter of fiscal
2022.

Revenues
and minutes of use from IDT Global decreased in each of fiscal 2023 and fiscal 2022 compared to the prior fiscal year 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 IDT Global will continue
to be adversely impacted by these trends, and minutes of use and revenues will likely continue to decline from quarter-to-quarter, as
we seek to maximize economics rather than necessarily sustain minutes of use or revenues.

51

Direct
Cost of Revenues. Direct cost of revenues decreased in fiscal 2023 compared to fiscal 2022 primarily due to decreases in IDT Global,
IDT Digital Payments, and BOSS Revolution Calling’s revenues. Direct cost of revenues decreased in fiscal 2022 compared to fiscal
2021 primarily due to decreases in BOSS Revolution Calling’s and IDT Global’s revenues, partially offset by an increase in
IDT Digital Payments’ direct cost of revenues in fiscal 2022 compared to fiscal 2021 because of the increase in IDT Digital Payments’
revenues.

Selling,
General and Administrative. Selling, general and administrative expense decreased in fiscal 2023 compared to fiscal 2022 primarily
due to decreases in debit and credit card processing charges, sales commissions, and employee compensation, partially offset by an increase
in stock-based compensation. Selling, general and administrative expense increased in fiscal 2022 compared to fiscal 2021 primarily due
to increases in marketing expense, employee compensation, and consulting expense, partially offset by a decrease in sales commissions.
As a percentage of Traditional Communications’ revenue, Traditional Communications’ selling, general and administrative expense
was 10.7%, 9.5%, and 8.3% in fiscal 2023, fiscal 2022, and fiscal 2021, respectively.

Depreciation
and Amortization. Depreciation and amortization expense decreased in each of fiscal 2023 and fiscal 2022 compared to the prior fiscal
year primarily due to decreases in depreciation as more of our property, plant, and equipment became fully depreciated, partially offset
by increases in depreciation of equipment added to our telecommunications network and capitalized costs of consultants and employees
developing internal use software.

Severance
Expense. Traditional Communications incurred severance expense of $0.9 million, $0.1 million, and $0.5 million in fiscal 2023, fiscal
2022, and fiscal 2021, respectively.

Other
Operating (Expense) Gain, net. Other operating (expense) gain, net included $3.9 million, $0.1 million, and $0.5 million in fiscal
2023, fiscal 2022, and fiscal 2021, respectively for the indemnification of one of our cable telephony customers related to patent infringement
claims brought against the customer. On May 8, 2023, we and the customer agreed to a release from the indemnification agreement in exchange
for $3.9 million, of which $1.9 million was paid on May 10, 2023, and the remainder will be paid in five monthly invoice deductions of
$0.4 million each. Also, in fiscal 2023, we increased the estimated fair value of acquisition-related contingent consideration by $0.2
million, and we recorded an expense of $1.4 million for internal use software that was taken out of service. Other operating (expense)
gain, 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 and expense of $0.6 million for the settlement of a claim related to
IDT Global.

Corporate

[[GREPCENT_TABLE]]
[["(in millions)","","","","","","","","","","","2023 change from 2022","","","2022 change from 2021"],["Year ended July 31","","2023","","","2022","","","2021","","","$","","","%","","","$","","","%"],["General and administrative","","$","(9.3",")","","$","(7.8",")","","$","(7.5",")","","$","1.5","","","","18.6","%","","$","0.3","","","","3.6","%"],["Depreciation and amortization","","","(0.1",")","","","(0.1",")","","","(0.1",")","","","\u2014","","","","(30.5",")","","","\u2014","","","","1.6"],["Other operating (expense) gain, net","","","(0.3",")","","","(1.0",")","","","0.2","","","","(0.7",")","","","(67.2",")","","","1.2","","","","560.0"],["Loss from operations","","$","(9.7",")","","$","(8.9",")","","$","(7.4",")","","$","(0.8",")","","","(8.2",")%","","$","(1.5",")","","","(20.7",")%"]]
[[/GREPCENT_TABLE]]

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

General
and Administrative. Corporate general and administrative expense increased in fiscal 2023 compared to fiscal 2022 primarily because
of increases in audit and accounting fees, employee compensation, and stock-based compensation expense. Corporate general and administrative
expense increased in fiscal 2022 compared to fiscal 2021 primarily because of an increase in employee compensation. As a percentage of
our consolidated revenues, Corporate general and administrative expense was 0.7%, 0.6%, and 0.5% in fiscal 2023, fiscal 2022, and fiscal
2021, respectively.

Other
Operating (Expense) Gain, net. In September 2017, we and certain of our subsidiaries were certified by the New Jersey Economic Development
Authority, or NJEDA, as having met the requirements of the Grow New Jersey Assistance Act Tax Credit Program. The program provides for
credits against a corporation’s New Jersey corporate business tax liability for maintaining a minimum number of employees in New
Jersey, and that tax credits may be sold subject to certain conditions. On June 5, 2023, we received a 2019 tax credit certificate for
$1.8 million from the NJEDA. In August 2023, we sold the certificate for cash of $1.6 million. As discussed in Note 23 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 class
action on behalf of Straight Path’s stockholders. We incurred legal fees of $5.8 million, $7.7 million, and $2.9 million in fiscal
2023, fiscal 2022, and fiscal 2021, respectively, related to this action. Also, we recorded offsetting gains from insurance claims for
this matter of $3.8 million, $6.7 million, and $3.1 million in fiscal 2023, fiscal 2022, and fiscal 2021, respectively. On October 3,
2023, the Court of Chancery of the State of Delaware dismissed all claims against us, and found that, contrary to the plaintiffs’
allegations, the class suffered no damages. The plaintiffs will have 30 days from entry of the final order to file an appeal.

52

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 a building and parking garage located at 520 Broad Street, Newark, New Jersey
that was previously owned by Rafael Holdings. On August 22, 2022, Rafael Holdings sold the building and parking garage to an unrelated
third party. Our lease in that property continues with the new owner. 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 fiscal 2023, we incurred lease costs of $0.3 million
in connection with the Rafael Holdings’ leases, which excludes Newark lease costs after August 22, 2022. In fiscal 2022 and fiscal
2021, we incurred lease costs of $2.0 million and $1.9 million, respectively, in connection with the Rafael Holdings’ leases. Lease
costs incurred in connection with the Rafael Holdings’ leases are included in consolidated selling, general and administrative
expense.

Stock-Based
Compensation Expense. Stock-based compensation expense included in consolidated selling, general and administrative expense was $4.5
million, $1.9 million, and $1.5 million in fiscal 2023, fiscal 2022, and fiscal 2021, respectively.

The
increase in stock-based compensation expense in fiscal 2023 compared to fiscal 2022 was primarily due to the grant of deferred stock
units, or DSUs, that, upon vesting, will entitle the grantees to receive shares of our Class B common stock. In the fiscal 2023, we granted
an aggregate of 0.2 million DSUs to certain of our executive officers and other employees. The number of shares that will be issuable
on each vesting date will vary between 50% to 200% of the number of DSUs that vest on that vesting date, depending on the market price
for the underlying Class B common stock on the vesting date relative to the base price approved by the Compensation Committee of our
Board of Directors of $25.45 per share (which was based on the market price at the time of the initial grants under this program). On
May 17, 2023, the first vesting date under the program, in accordance with the program and based on certain elections made by grantees,
we issued 41,945 shares of our Class B common stock for vested DSUs. Based on those elections, vesting for 31,909 DSUs was delayed until
February 21, 2024. Subject to continued full time employment or other service to us, the remaining DSUs are scheduled to vest on February
21, 2024 and February 25, 2025. The grantees will have the right to elect a later vesting date no later than January 19, 2024 for the
February 21, 2024 vesting date. A grantee will have the option to elect a later vesting date for one-half or all of the shares scheduled
to vest on February 21, 2024 and any DSUs that do not vest based on the grantee’s election, will be eligible to vest on February
25, 2025. We estimated that the fair value of the DSUs on the date of grants was an aggregate of $5.4 million, which is being recognized
on a graded vesting basis over the requisite service periods ending in February 2025. We used a risk neutral Monte Carlo simulation method
in our valuation of the DSUs, which simulated the range of possible future values of our Class B common stock over the life of the DSUs.
The weighted average grant date fair value per DSU was $27.21. At July 31, 2023, there was $2.3 million of total unrecognized compensation
cost related to non-vested DSUs.

The
increase in stock-based compensation expense in fiscal 2022 compared to fiscal 2021 was primarily due to expense related to the grant
in February 2022 of restricted shares of NRS’ Class B common stock to certain of our employees for which we recorded stock-based
compensation expense of $1.2 million, partially offset by reductions in expense for deferred stock units granted in June 2019.

Effective
as of June 30, 2022, restricted shares of NRS’ Class B common stock were granted to certain NRS employees. The restrictions on
the shares will lapse in three installments on each of June 1, 2024, 2026, and 2027. The estimated fair value of the restricted shares
on the grant date was $3.3 million, which is being recognized over the vesting period. At July 31, 2023, unrecognized compensation cost
related to NRS’ non-vested Class B common stock was an aggregate of $2.6 million. The unrecognized compensation cost is expected
to be recognized over the remaining vesting period that ends in fiscal 2027.

53

[[GREPCENT_TABLE]]
[["(in millions)","","","","","","","","","","","2023 change from 2022","","","2022 change from 2021"],["Year ended July 31","","2023","","","2022","","","2021","","","$","","","%","","","$","","","%"],["Income from operations","","$","60.7","","","$","60.1","","","$","57.0","","","$","0.6","","","","1.1","%","","$","3.1","","","","5.4","%"],["Interest income, net","","","3.2","","","","0.2","","","","0.3","","","","3.0","","","","nm","","","","(0.1",")","","","(54.1",")"],["Other (expense) income, net","","","(3.1",")","","","(25.4",")","","","7.9","","","","22.3","","","","87.8","","","","(33.3",")","","","(420.3",")"],["(Provision for) benefit from income taxes","","","(16.4",")","","","(5.9",")","","","31.7","","","","(10.5",")","","","(179.7",")","","","(37.6",")","","","(118.6",")"],["Net income","","","44.4","","","","29.0","","","","96.9","","","","15.4","","","","53.0","","","","(67.9",")","","","(70.1",")"],["Net income attributable to noncontrolling interests","","","(3.9",")","","","(2.0",")","","","(0.4",")","","","(1.9",")","","","(96.0",")","","","(1.6",")","","","(375.2",")"],["Net income attributable to IDT Corporation","","$","40.5","","","$","27.0","","","$","96.5","","","$","13.5","","","","49.8","%","","$","(69.5",")","","","(72.0",")%"]]
[[/GREPCENT_TABLE]]

nm—not
meaningful

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

[[GREPCENT_TABLE]]
[["(in millions) Year ended July 31","","2023","","","2022","","","2021"],["Foreign currency transaction gains (losses)","","$","3.3","","","$","(1.7",")","","$","1.0"],["Equity in net loss of investee","","","(3.1",")","","","(3.0",")","","","(1.1",")"],["(Losses) gains on investments","","","(2.6",")","","","(19.3",")","","","8.8"],["Other","","","(0.7",")","","","(1.4",")","","","(0.8",")"],["TOTAL","","$","(3.1",")","","$","(25.4",")","","$","7.9"]]
[[/GREPCENT_TABLE]]

As
of February 2, 2021, we have an investment in convertible preferred stock of a communications company (the equity method investee, or
EMI). Our initial investment represented 23.95% of the outstanding shares of the EMI on an as converted basis, and on August 10, 2021,
our investment increased to 26.57% of the outstanding shares of the EMI on an as converted basis. On April 6, 2023, in accordance with
an Agreement and Plan of Merger dated as of April 5, 2023, the EMI merged with and into its subsidiary, with the subsidiary being the
surviving corporation. Each of the EMI’s shareholders agreed to purchase additional shares of the EMI’s convertible preferred
stock through May 31, 2023. Following the merger, the conversion of our notes receivable into EMI shares described below under Liquidity
and Capital Resources, Investing Activities, and the purchases of the additional EMI’s shares, our ownership interest increased
to 33.3% of the EMI’s outstanding shares. We account for this investment using the equity method since we can exercise significant
influence over the operating and financial policies of the EMI but we do not have a controlling interest. We determined that on the dates
of the acquisitions, there were difference between our investment in the EMI and our proportional interest in the equity of the EMI of
an aggregate of $8.2 million, which represented the share of the EMI’s customer list on the dates of the acquisitions attributed
to our interest in the EMI. These basis differences are being amortized over the 6-year estimated life of the customer list. “Equity
in net loss of investee” also includes the amortization of the equity method basis difference.

The
net losses on investments in fiscal 2023 included an unrealized loss of $7,000 on shares of Rafael Holdings’ Class B common stock.
The net losses on investments in fiscal 2022 included an unrealized loss of $14.1 million on shares of Rafael Holdings’ Class B
common stock. The net gains on investments in fiscal 2021 included an unrealized gain of $8.3 million on shares of Rafael Holdings’
Class B common stock.

(Provision
for) Benefit from 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.

The
change in income tax expense in fiscal 2023 and fiscal 2022 compared to the prior fiscal year, excluding the benefit from the valuation
allowance released in fiscal 2021, was primarily due to differences in the amount of taxable income earned in the various taxing jurisdictions.

54

Net
Income Attributable to Noncontrolling Interests. The change in the net income attributable to noncontrolling interests in fiscal
2023 compared to fiscal 2022 was primarily due to increases in the net income of NRS and our VIE, as well as a reduction in the net loss
of net2phone 2.0. The change in the net income attributable to noncontrolling interests in fiscal 2022 compared to fiscal 2021 was primarily
due to increases in the net income of NRS and our VIE, partially offset by an increase in the net loss of net2phone 2.0.

LIQUIDITY
AND CAPITAL RESOURCES

As
of the date of this Annual Report, we expect our cash from operations and the balance of cash, cash equivalents, debt securities, and
current equity investments that we held on July 31, 2023 will be sufficient to meet our currently anticipated working capital and capital
expenditure requirements during fiscal 2024.

At
July 31, 2023, we had cash, cash equivalents, debt securities, and current equity investments of $152.2 million and working capital (current
assets in excess of current liabilities) of $93.0 million.

We
treat unrestricted cash and cash equivalents held by IDT Payment Services, Inc. and IDT Payment Services of New York, LLC as substantially
restricted and unavailable for other purposes. At July 31, 2023, “Cash and cash equivalents” in our consolidated balance
sheet included an aggregate of $20.6 million held by IDT Payment Services, Inc. and IDT Payment Services of New York, LLC that was unavailable
for other purposes.

Contractual
Obligations and Commitments

The
following table includes our anticipated material cash requirements from contractual obligations and other commitments at July 31, 2023:

[[GREPCENT_TABLE]]
[["Payments due by period (in millions)","","Total","","","Less than 1 year","","","1\u20143 years","","","4\u20145 years","","","After 5 years"],["Purchase commitments","","$","10.8","","","$","10.8","","","$","\u2014","","","$","\u2014","","","$","\u2014"],["Connectivity obligations under service agreements","","","0.6","","","","0.1","","","","0.5","","","","\u2014","","","","\u2014"],["Operating leases including short-term leases","","","7.0","","","","3.6","","","","3.0","","","","0.4","","","","\u2014"],["TOTAL(1)","","$","18.4","","","$","14.5","","","$","3.5","","","$","0.4","","","$","\u2014"]]
[[/GREPCENT_TABLE]]

[[GREPCENT_TABLE]]
[["(1)","The above table does not include up to $10 million for the potential redemption of shares of NRS\u2019 Class B common stock, an aggregate of $27.1 million in performance bonds, and up to $9.0 million for other potential payments including contingent consideration related to business acquisitions, due to the uncertainty of the amount and/or timing of any such payments."]]
[[/GREPCENT_TABLE]]

Consolidated
Financial Condition

[[GREPCENT_TABLE]]
[["(in millions) Year ended July 31","","2023","","","2022","","","2021"],["Cash flows provided by (used in):"],["Operating activities","","$","54.1","","","$","29.4","","","$","66.6"],["Investing activities","","","(33.4",")","","","(33.8",")","","","(44.1",")"],["Financing activities","","","(15.8",")","","","(15.6",")","","","(4.5",")"],["Effect of exchange rate changes on cash, cash equivalents, and restricted cash and cash equivalents","","","4.4","","","","(17.4",")","","","7.7"],["Increase (decrease) in cash, cash equivalents, and restricted cash and cash equivalents","","$","9.3","","","$","(37.4",")","","$","25.7"]]
[[/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 decreased to $37.7 million at July 31, 2023 from $44.9 million at July 31, 2022 primarily due to collections
in fiscal 2023 that were greater than amounts billed during fiscal 2023. Gross trade accounts receivable increased to $44.9 million at
July 31, 2022 from $39.0 million at July 31, 2021 primarily due to amounts billed during fiscal 2022 that were greater than collections
in fiscal 2022.

Deferred
revenue arises from sales of prepaid products and varies from period to period depending on the mix and the timing of revenues. Deferred
revenue decreased to $35.3 million at July 31, 2023 from $36.5 million at July 31, 2022 and $42.3 million at July 31, 2021 due to decreases
in the BOSS Revolution Calling and IDT Digital Payments deferred revenue balances.

55

Customer
deposit liabilities at IDTFS increased to $86.5 million at July 31, 2023 from $85.8 million at July 31, 2022 and decreased from $115.5
million at July 31, 2021. Our restricted cash and cash equivalents included $87.3 million, $86.6 million, and $115.8 million at July
31, 2023, 2022, and 2021, respectively, held by the bank.

Beginning
in June 2019, as part of a commercial resolution, we indemnified one of our cable telephony customers related to patent infringement
claims brought against the customer. On May 8, 2023, we and the customer agreed to a release from the indemnification agreement in exchange
for $3.9 million, of which $1.9 million was paid on May 10, 2023, and the remainder will be paid in five monthly invoice deductions of
$0.4 million each.

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 related to claims that merchants paid excessive fees to accept Visa and Mastercard cards between
January 1, 2004 and January 25, 2019.

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

As
discussed in Note 23 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 class action on behalf of the stockholders of our former subsidiary, Straight Path. On October 3, 2023,
the Court of Chancery of the State of Delaware dismissed all claims against us, and found that, contrary to the plaintiffs’ allegations,
the class suffered no damages. The plaintiffs will have 30 days from entry of the final order to file an appeal.

Investing
Activities

Our
capital expenditures were $22.0 million in fiscal 2023, $21.9 million in fiscal 2022, and $16.8 million in fiscal 2021. We currently
anticipate that total capital expenditures in fiscal 2024 will be $21 million to $23 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
March 3, 2022, net2phone 2.0 purchased all of the outstanding shares of Onwaba S.R.L. and Gem S.R.L. for cash of $7.1 million, net of
cash acquired. We also recorded an aggregate of $4.5 million for the estimated fair value of future payments subject to holdback and
contingent consideration. Onwaba S.R.L. and Gem S.R.L. are located in Uruguay and use the trade name Integra. The purchase price also
included 27,765 shares of our Class B common stock with a value of $1.0 million that were issued at closing. The potential future payments
were an aggregate of up to $3.3 million, half of which was paid in fiscal 2023 at the end of 12 months after closing and the remainder
will be paid at the end of 24 months after closing, subject to holdback for the settlement of claims against the sellers, if any. The
contingent consideration is an aggregate of up to $3.5 million based on annual cumulative incremental recurring seat revenue of the net2phone
segment over a four-year period, payable in cash and/or equity at net2phone 2.0’s discretion.

On
March 1, 2022, our subsidiary, IDT International Telecom, Inc., or IDTIT, purchased all of the outstanding shares of Leaf for cash of
$0.3 million, net of cash acquired. We also recorded $3.3 million for the estimated fair value of contingent consideration. The contingent
consideration was an aggregate of up to $5.5 million based on annual gross profit over a five-year period. In fiscal 2023, we determined
that the requirements for a portion of the contingent consideration payments related to the Leaf acquisition would not be met. We recorded
a gain of $1.6 million on the write-off of this contingent consideration payment obligation, which was included in “Other operating
(expense) gain, net” in the accompanying consolidated statements of income.

On
December 3, 2020, IDTIT acquired 51% of the issued shares of Sochitel for $2.4 million, net of cash acquired. We also recorded $0.4 million
for the estimated fair value of contingent consideration. In fiscal 2023, we paid contingent consideration of $0.5 million and recorded
an expense of $0.1 million, which was included in “Other operating (expense) gain, net” in the accompanying consolidated
statements of income. Pursuant to a Put/Call Option Agreement related to the 5% of the issued shares of Sochitel 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 Sochitel’s issued shares from the remaining noncontrolling interest
holder for $1.0 million. We also recorded $0.2 million for the estimated fair value of contingent consideration. In fiscal 2023, we paid
contingent consideration of $0.3 million and recorded an expense of $0.1 million, which was included in “Other operating (expense)
gain, net” in the accompanying consolidated statements of income.

56

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 convertible preferred stock, and on August 10, 2021, we
paid $1.1 million to purchase additional shares of the EMI’s convertible preferred stock. The initial shares purchased represented
23.95% of the outstanding shares of the EMI on an as converted basis. The subsequent purchases increased our ownership to 26.57% on an
as converted basis. On April 6, 2023, in accordance with an Agreement and Plan of Merger dated as of April 5, 2023, the EMI merged with
and into its subsidiary, with the subsidiary being the surviving corporation. Effective with the merger, among other things, the notes
receivable from the EMI that we held with an aggregate principal and accrued interest of $4.0 million were converted into shares of the
subsidiary’s Series A Convertible Preferred Stock, or EMI Preferred Stock. In addition, each of the EMI’s shareholders agreed
to purchase additional shares of EMI Preferred Stock, for which we paid $0.9 million in fiscal 2023 to purchase the additional shares.
Following the merger, the conversions, and the purchases of additional shares of EMI Preferred Stock, the Company’s ownership increased
to 33.3% of the EMI’s outstanding shares. As of July 27, 2023, the EMI’s shareholders including us agreed to purchase additional
shares of EMI Preferred Stock. We subscribed to purchase additional shares for an aggregate of $1.0 million. In the first quarter of
fiscal 2024 through October 11, 2023, the Company paid $0.7 million to purchase the shares.

Purchases
of debt securities and equity investments were $59.9 million, $24.5 million, and $43.2 million in fiscal 2023, fiscal 2022, and fiscal
2021, respectively. Proceeds from maturities and sales of debt securities and redemptions of equity investments were $49.2 million, $21.2
million, and $26.2 million in fiscal 2023, fiscal 2022, and fiscal 2021, respectively.

Financing
Activities

We
distributed cash of $0.3 million, $0.5 million, and $0.8 million in fiscal 2023, fiscal 2022, and fiscal 2021, respectively, to the noncontrolling
interests in certain of our subsidiaries.

In
fiscal 2023, fiscal 2022, and fiscal 2021, we received proceeds from financing-related other liabilities of $0.3 million, $2.3 million,
and $0.7 million, respectively.

In
fiscal 2023, fiscal 2022, and fiscal 2021, we repaid financing-related other liabilities of $2.0 million, $1.3 million, and $0.1 million,
respectively.

On
September 29, 2021, NRS sold shares of its Class B common stock representing 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 that NRS redeem 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.

Our
subsidiary, IDT Telecom, Inc., or IDT Telecom, entered into a credit agreement, dated as of May 17, 2021, with TD Bank, N.A. for a revolving
credit facility for up to a maximum principal amount of $25.0 million. As of July 28, 2023, IDT Telecom and TD Bank, N.A. amended certain
terms of the credit agreement. IDT Telecom may use the proceeds to finance working capital requirements and for certain closing costs
of the facility. At July 31, 2023 and 2022, there were no amounts outstanding under this facility. In fiscal 2023 and fiscal 2022, IDT
Telecom borrowed and repaid an aggregate of $27.4 million and $2.6 million, respectively, under the facility. The revolving credit facility
is secured by primarily all of IDT Telecom’s assets. The principal outstanding bears interest per annum at the secured overnight
financing rate published by the Federal Reserve Bank of New York plus 10 basis points, plus depending upon IDT Telecom’s leverage
ratio as computed for the most recent fiscal quarter, 125 to 175 basis points. Interest is payable monthly, and all outstanding principal
and any accrued and unpaid interest is due on May 16, 2026. IDT Telecom pays a quarterly unused commitment fee 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, 2023, IDT Telecom
was in compliance with all of the covenants. In the first quarter of fiscal 2024, we borrowed and repaid $25.0 million under the facility.

57

In
fiscal 2023, fiscal 2022, and fiscal 2021, we received cash from the exercise of stock options of $0.2 million, $0.1 million, and $0.7
million, respectively, for which we issued 12,500; 10,000; and 81,041 shares, respectively, of our Class B common stock. In addition,
in April 2022, Howard S. Jonas exercised stock options for 1.0 million shares of our Class B common stock that were granted on May 2,
2017. The exercise price of these options was $14.93 per share and the expiration date was May 1, 2022. Mr. Jonas used 528,635 shares
of our Class B common stock with a value of $14.9 million to pay the aggregate exercise price of the options.

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 2023, we repurchased 511,546
shares of Class B common stock for an aggregate purchase price of $13.1 million. In fiscal 2022, we repurchased 554,744 shares of Class
B common stock for an aggregate purchase price of $13.4 million. In fiscal 2021, we repurchased 463,792 shares of Class B common stock
for an aggregate purchase price of $2.8 million. At July 31, 2023, 4.7 million shares remained available for repurchase under the stock
repurchase program.

In
the first quarter of fiscal 2024 through October 11, 2023, we repurchased 124,530 shares of Class B common stock for an aggregate purchase
price of $2.8 million.

In
fiscal 2023, fiscal 2022, and fiscal 2021, we paid $0.8 million, $9.0 million, and $1.3 million, respectively, to repurchase 28,227;
200,438; and 109,381 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 shares issued for bonus payments, the vesting of deferred stock units, and the lapsing
of restrictions on restricted stock. In addition, in April 2022, Mr. Jonas tendered 137,364 shares of our Class B common stock with a
value of $3.9 million to satisfy a portion of his tax obligations in connection with his stock option exercises. Such shares were repurchased
by us based on their fair market value as of the close of business on the trading day immediately prior to the vesting date.

Other
Sources and Uses of Resources

We
are considering spin-offs 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. There is
no assurance that any of these transactions will be completed.

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