IDT CORP (IDT) FY 2024 MD&A

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.

Our
Management’s Discussion and Analysis of Financial Condition and Results of Operations included in this Annual Report generally
discusses fiscal 2024 and fiscal 2023 items and year-to-year comparisons between fiscal 2024 and fiscal 2023. Discussions of fiscal 2022
items and year-to-year comparisons between fiscal 2023 and fiscal 2022 that are not included in this Annual Report can be found in “Management’s
Discussion and Analysis of Financial Condition and Results of Operations” in Part II, Item 7 of our Annual Report on Form 10-K
for the fiscal year ended July 31, 2023.

CRITICAL
ACCOUNTING ESTIMATES

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

Goodwill
Impairment Testing

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

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

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

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

44

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

For
our annual goodwill impairment test as of May 1, 2023, 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.

We
do not believe we are currently at risk of goodwill impairment based on qualitative assessments of our reporting units for the three
months ended July 31, 2024. We considered several factors in these qualitative assessments including (i) the business enterprise value
of the reporting unit from the last quantitative test and the excess of the fair value over carrying value, (ii) macroeconomic conditions
including changes in interest rates and discount rates, (iii) industry and market considerations including industry revenue, EBITDA margins,
and multiples based on business enterprise value to revenues and to EBITDA, and (iv) the recent financial performance and budget of the
reporting unit.

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

Valuation
of Long-Lived Assets

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

There
were no such events or changes in circumstances in fiscal 2024 or fiscal 2023. If we determine that events or changes in circumstances
indicate the carrying value of certain long-lived assets may not be recoverable, we test for impairment based on the projected undiscounted
cash flows to be derived from such asset. If the projected undiscounted future cash flows are less than the carrying value of the asset,
we will record an impairment loss based on the difference between the estimated fair value and the carrying value of the asset. We generally
measure fair value by considering sale prices for similar assets or by discounting estimated future cash flows from the asset using an
appropriate discount rate. Cash flow projections for specific assets and fair value estimates of assets require significant estimates
and assumptions by management that have a significant level of estimation uncertainty. Should our estimates and assumptions prove to
be incorrect, we may be required to record impairments in future periods and such impairments could be material.

Allowance
for Credit Losses on Accounts Receivable

Our
allowance for credit losses was $6.4 million at July 31, 2024 and our allowance for doubtful accounts was $5.6 million at July 31, 2023.
The allowance as a percentage of gross trade accounts receivable decreased to 13.1% at July 31, 2024 from 15.0% at July 31, 2023 because,
at July 31, 2024 compared to July 31, 2023, gross trade accounts receivable increased 28.7% and the allowance increased 12.6%. The most
significant increases in the trade accounts receivable balance at July 31, 2024 compared to July 31, 2023 were in NRS and IDT Global.

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. Effective with the adoption of ASU 2016-13, we record an expense based
on a forward-looking current expected credit loss model to maintain our allowance for credit losses. When determining the allowance for
trade accounts receivable, we 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 also consider future economic trends to
estimate expected credit losses over the lifetime of the asset. Credit risks are assessed based on historical write-offs, net of recoveries,
as well as an analysis of the aged accounts receivable balances with allowances generally increasing as the receivable ages. Accounts
receivable may be fully reserved for when specific collection issues are known to exist, such as pending bankruptcies. Account balances
are written off against the allowance when it is determined that the receivable will not be recovered.

45

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

Income
Taxes, Sales Taxes, and Regulatory Agency Fees

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

As
of July 31, 2024, net2phone had U.S. federal net operating loss carryforwards of approximately $11 million, which will expire through
fiscal 2027. With our reacquisition of net2phone in March 2006, its losses were limited under Internal Revenue Code, or IRC, Section
382 to approximately $7 million per year. In fiscal 2024, we had an IRC Section 382 study conducted on the reacquisition and the limitation
was adjusted to $9 million per year. We recorded a tax benefit related to the adjusted amount of $23.6 million in fiscal 2024.

The
valuation allowance on our deferred income tax assets was $13.6 million and $10.6 million at July 31, 2024 and 2023, respectively. In
fiscal 2024, we increased the valuation allowance by $3.0 million, which included the establishment of a valuation allowance of $3.5
million for deferred income tax assets that were not more likely than not going to be utilized prior to expiration, net of a decrease
of $0.2 million due to the utilization or disposal of previously valued deferred income tax assets and a release of $0.3 million for
profitability in the United Kingdom. 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.

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 reported our calendar year 2016 revenue, was audited by the USAC. The USAC’s final decision imposed
a $2.9 million charge on us for 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.
We have made certain changes to our filing policies and procedures for years that remain potentially under audit. At July 31, 2024 and
2023, our accrued expenses included $25.9 million and $26.8 million, respectively, for FCC-related regulatory fees for the year covered
by the audit, as well as prior and subsequent years.

RECENTLY
ISSUED ACCOUNTING STANDARDS NOT YET ADOPTED

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

In
December 2023, the FASB issued ASU No. 2023-08, Intangibles-Goodwill and Other-Crypto Assets (Subtopic 350-60), Accounting
for and Disclosure of Crypto Assets, that changes the accounting for crypto assets from a cost-less-impairment model to fair value,
with changes recognized in net income each reporting period. The ASU also requires enhanced disclosures including, among other things,
the name, cost basis, fair value, and number of units for each significant holding, and a rollforward of annual activity including additions,
dispositions, gains, and losses. We will adopt the amendments in this ASU for our fiscal year beginning on August 1, 2025. The ASU requires
a cumulative-effect adjustment to the opening balance of retained earnings as of adoption. We are evaluating the impact that this ASU
will have on our consolidated financial statements.

46

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 consolidated results of operations.

As
of July 31, 2024, we owned 94.0% of the outstanding shares of our subsidiary, net2phone 2.0, Inc., or net2phone 2.0, which owns and operates
the net2phone segment, and 81.5% of the outstanding shares of NRS, and, on a fully diluted basis assuming all the vesting criteria related
to various rights granted have been met, we would own 90.0% of net2phone 2.0 and 79.3% of NRS.

Reclassifications

From
and after August 1, 2023, we include depreciation and amortization in “Direct cost of revenues” and “Selling, general
and administrative” expense. Prior to August 1, 2023, depreciation and amortization was a separate caption in the consolidated
statements of income. In addition, from and after August 1, 2023, we are reporting gross profit and gross profit margin in accordance
with U.S. GAAP in our “Results of Operations.”

From
and after February 1, 2024, we reclassified most of our technology and development expenses from “Selling, general and administrative”
expense to a new “Technology and development” expense caption in the consolidated statements of income and reclassified an
amount that was immaterial in all periods to “Direct cost of revenues.” “Technology and development” expense
consists primarily of personnel-related expenses for employees involved in the research, design, development, and maintenance of both
new and existing technology products and services, including salaries, benefits, and stock-based compensation. “Technology and
development” expense also includes costs for software licenses, subscription services, and other companywide technology tools dedicated
for use by our technology and development teams. The costs of third-party contractors that support our technology and development are
also included. “Technology and development” expense also includes the costs of product and engineering teams used to support
the development of both internal infrastructure and internal-use software, to the extent such costs do not qualify for capitalization.
The expenses reclassified to “Direct cost of revenues” are the costs of cloud computing arrangements hosted by a vendor in
the production environment incurred by the net2phone segment and NRS, and net2phone’s colocation costs for data centers where net2phone
is not fully operational in the cloud. Finally, depreciation and amortization of capitalized internal use software costs was reclassified
from “Selling, general and administrative” expense to “Technology and development” expense.

The
following table shows the amounts that were reclassified in fiscal 2023 and fiscal 2022 to conform to the current year’s presentation:

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 10.3%, 10.8%, and 12.5%
of our consolidated revenues in fiscal 2024, fiscal 2023, and fiscal 2022, respectively. Our customers with the five largest receivables
balance collectively accounted for 22.7% and 16.7% of our consolidated gross trade accounts receivable at July 31, 2024 and 2023, 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.

47

Explanation
of Performance Metrics

Our
results of operations discussion include the following performance metrics:

NRS
uses two key metrics to measure the size of its customer base: active POS terminals and payment processing accounts. Active POS terminals
are the number of POS terminals that have completed at least one transaction in the calendar month. It excludes POS terminals that have
not been fully installed by the end of the month. Payment processing accounts are 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’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, 2024 compared to Year Ended July 31, 2023

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

48

National
Retail Solutions Segment

NRS,
which represented 8.6%, 6.2%, and 3.8% of our total revenues in fiscal 2024, fiscal 2023, and fiscal 2022, 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.

nm—not
meaningful

Revenues.
Revenues increased in fiscal 2024 compared to fiscal 2023 driven primarily by revenue growth from NRS’ merchant services, as
well as the expansion of NRS’ POS network.

Direct
Cost of Revenues. Direct cost of revenues increased in fiscal 2024 compared to fiscal 2023 primarily due to the increase in the direct
costs of NRS’ POS terminal sales.

Selling,
General and Administrative. Selling, general and administrative expense increased in fiscal 2024 compared to fiscal 2023 primarily
due to increases in sales commissions, employee compensation, and bad debt expense. As a percentage of NRS’ revenue, NRS’
selling, general and administrative expense was 60.7%, 61.0%, and 55.3% in fiscal 2024, fiscal 2023, and fiscal 2022, respectively.

Technology
and Development. Technology and development expense increased in fiscal 2024 compared to fiscal 2023 primarily due to increases in
employee compensation and consulting expense.

Other
Operating Expense. In fiscal 2024, NRS recorded expense of $0.2 million for capitalized internal use software costs for software
that was taken out of service, as well as certain other assets no longer in use.

49

Fintech
Segment

Fintech,
which represented 10.0%, 7.0%, and 4.7% of our total revenues in fiscal 2024, fiscal 2023, and fiscal 2022, respectively, is comprised
of: (i) BOSS Money, a provider of international money remittance and related value/payment transfer services; and (ii) other, significantly
smaller, financial services businesses, including a variable interest entity, or VIE, that operates money transfer businesses, and IDTFS,
our Gibraltar-based bank.

nm—not
meaningful

Revenues.
Revenues from BOSS Money increased in fiscal 2024 compared to fiscal 2023 primarily because of increased transaction volume in BOSS
Money’s retail and digital channels. BOSS Money continues to benefit from cross-marketing to BOSS Revolution customers, the expansion
of its retail agent network, and enhanced user-experience within the BOSS Money and BOSS Revolution apps.

Fintech’s
other revenues increased in fiscal 2024 compared to fiscal 2023 primarily because of an increase in IDTFS’ revenues.

Direct
Cost of Revenues. Direct cost of revenues increased in fiscal 2024 compared to fiscal 2023 primarily due to increases in BOSS Money’s
and IDTFS’ direct cost of revenues, which reflected the increases in revenues.

Selling,
General and Administrative. Selling, general and administrative expense increased in fiscal 2024 compared to fiscal 2023 primarily
due to increases in debit and credit card processing charges, employee compensation, bank fees, and marketing expenses. The increase
in card processing charges was the result of increased credit and debit card transactions through our BOSS Money app and other digital
channels. As a percentage of Fintech’s revenue, Fintech’s selling, general and administrative expense was 49.4%, 54.5%, and
61.2% in fiscal 2024, fiscal 2023, and fiscal 2022, respectively.

Technology
and Development. Technology and development expense increased in fiscal 2024 compared to fiscal 2023 primarily due to increases in
employee compensation and depreciation and amortization expense.

Other
Operating Gain, net. In fiscal 2024 and fiscal 2023, we determined that the requirements for the contingent consideration payments
related to the Leaf Global Fintech Corporation, or Leaf, acquisition would likely not be met. We recognized gains of $1.8 million and
$1.6 million in fiscal 2024 and fiscal 2023, respectively, on the write-off of these contingent consideration payment obligations. In
addition, in fiscal 2024, we completed a portion of the integration of the Leaf Wallet platform into the BOSS Money app, including replacing
the Leaf tradename with BOSS Money. The Leaf tradename balance of $0.1 million was written-off in fiscal 2024. In fiscal 2023, Leaf received
$0.4 million from government grants for the development and commercialization of blockchain-backed financial technologies.

50

net2phone
Segment

The
net2phone segment, which represented 6.8%, 5.8%, and 4.3% of our total revenues in fiscal 2024, fiscal 2023, and fiscal 2022, respectively,
is comprised of net2phone’s integrated cloud communications and contact center services.

nm—not
meaningful

Revenues.
net2phone’s revenues increased in fiscal 2024 compared to fiscal 2023 driven primarily by the growth in subscription revenue
in the U.S. and Latin American markets, which reflected the increase in seats served at July 31, 2024 compared to July 31, 2023.

Direct
Cost of Revenues. Direct cost of revenues increased in fiscal 2024 compared to fiscal 2023 primarily due to the increase in revenues,
with the largest increase in the U.S. market. net2phone’s focus on mid-sized businesses, multi-channel strategies, and localized
offerings generated revenue growth that exceeded the increase in direct cost of revenues.

Selling,
General and Administrative. Selling, general and administrative expense increased in fiscal 2024 compared to fiscal 2023 primarily
due to increases in employee compensation and sales commissions. As a percentage of net2phone’s revenues, net2phone’s selling,
general and administrative expense decreased to 63.9% from 68.7% and 81.7% in fiscal 2024, fiscal 2023, and fiscal 2022, respectively.

Technology
and Development. Technology and development expense increased in fiscal 2024 compared to fiscal 2023 primarily due to increases in
employee compensation and depreciation and amortization expense.

Other
Operating Gain (Expense), net. In fiscal 2024, we determined that the requirement for a contingent consideration payment related
to an acquisition in a prior period would not be met. We recognized a gain of $0.1 million on the write-off of this contingent consideration
payment obligation. In fiscal 2023, we recorded an expense of $0.1 million for telephone equipment that was taken out of service.

Traditional
Communications Segment

The
Traditional Communications segment, which represented 74.6%, 81.0%, and 87.2% of our total revenues in fiscal 2024, fiscal 2023, and
fiscal 2022, respectively, includes: (i) IDT Digital Payments, which enables customers to transfer airtime and bundles of airtime, messaging,
and data to international and domestic mobile accounts; (ii) BOSS Revolution, an international long-distance calling service marketed
primarily to immigrant communities in the United States and Canada; and (iii) IDT Global, a wholesale provider of international voice
and SMS termination and outsourced traffic management solutions to telecoms worldwide. Traditional Communications also includes other
small businesses and offerings including early-stage business initiatives and mature businesses in harvest mode.

51

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

nm—not
meaningful

Revenues.
Revenues from IDT Digital Payments decreased in fiscal 2024 compared to fiscal 2023 primarily from the deterioration of a key international
corridor that was particularly impactful to revenues in the wholesale channel, however, this corridor has not been a significant factor
since the second quarter of fiscal 2024.

Revenues
and minutes of use from BOSS Revolution decreased in fiscal 2024 compared to fiscal 2023. BOSS Revolution continues to be impacted by
persistent, market-wide trends, including the proliferation of unlimited calling plans offered by wireless carriers and mobile virtual
network operators, and the increasing penetration of free and paid over-the-top voice, video conferencing, and messaging services.

Revenues
and minutes of use from IDT Global decreased in fiscal 2024 compared to fiscal 2023 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.

Direct
Cost of Revenues. Direct cost of revenues decreased in fiscal 2024 compared to fiscal 2023 primarily due to decreases in minutes
of use and revenues.

Selling,
General and Administrative. Selling, general and administrative expense decreased in fiscal 2024 compared to fiscal 2023 primarily
due to decreases in sales commissions, employee compensation, and debit and credit card processing charges, partially offset by an increase
in stock-based compensation. As a percentage of Traditional Communications’ revenue, Traditional Communications’ selling,
general and administrative expense was 9.4%, 9.0%, and 7.9% in fiscal 2024, fiscal 2023, and fiscal 2022, respectively.

Technology
and Development. Technology and development expense decreased in fiscal 2024 compared to fiscal 2023 primarily due to decreases in
depreciation and amortization expense, software license and maintenance expense, and employee compensation.

Severance
Expense. Traditional Communications incurred severance expense of $1.6 million and $0.9 million in fiscal 2024 and fiscal 2023, respectively.

Other
Operating Expense, net. In fiscal 2024 and fiscal 2023, Traditional Communications recorded expense of $0.2 million and $1.4 million,
respectively, for internal use software that was taken out of service. In addition, in fiscal 2023, other operating expense, net included
$3.9 million 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. Also,
in fiscal 2023, we increased the estimated fair value of acquisition-related contingent consideration by $0.2 million.

52

Corporate

nm—not
meaningful

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 2024 compared to fiscal 2023 primarily because
of increases in audit and accounting fees and employee compensation. As a percentage of our consolidated revenues, Corporate general
and administrative expense was 0.9%, 0.8%, and 0.6% in fiscal 2024, fiscal 2023, and fiscal 2022, respectively.

Other
Operating Expense, net. 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) were named in a class action on behalf of the stockholders of our former subsidiary Straight
Path. We incurred legal fees of $7.2 million and $5.8 million in fiscal 2024 and fiscal 2023, respectively, related to this action. Also,
we recorded offsetting gains from insurance claims for this matter of $2.9 million and $3.8 million in fiscal 2024 and fiscal 2023, respectively.
In fiscal 2024, we received the final payment from our insurance policy for these claims. On October 3, 2023, the Court of Chancery of
the State of Delaware dismissed all claims against us, and found that, contrary to the plaintiffs’ allegations, the class suffered
no damages. The plaintiffs will have 30 days from entry of the final order to file an appeal.

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.

Consolidated

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

Stock-Based
Compensation Expense. Total stock-based compensation expense included in consolidated selling, general and administrative expense
and technology and development expense was $7.4 million and $4.5 million in fiscal 2024 and fiscal 2023, respectively. The increase in
stock-based compensation expense was primarily due to certain equity grants to Bill Pereira, our President and Chief Operating Officer,
in the second quarter of fiscal 2024, including deferred stock units, or DSUs, that, upon vesting, represent the right to receive shares
of our Class B common stock, and shares of Class B common stock of net2phone 2.0, as well as a contingent bonus subject to the completion
of certain financial milestones that may be paid, at Mr. Pereira’s option, in either shares of the Company’s Class B common
stock or cash. In fiscal 2024, two of these milestones were achieved, for which we issued to Mr. Pereira 39,155 shares of our Class B
common stock in fiscal 2024 with an issue date value of $1.5 million, and we will issue an additional 39,155 shares of our Class B common
stock in the first quarter of fiscal 2025.

As
of July 31, 2024, there was $0.6 million of total unrecognized compensation cost related to non-vested DSUs under our equity incentive
program adopted on November 30, 2022, which is being recognized on a graded vesting basis over the requisite service periods that end
in February 2025. On February 21, 2024, the second vesting date under the program, in accordance with the program and based on certain
elections made by grantees, we issued 53,706 shares of our Class B common stock for vested DSUs. Subject to continued full time employment
or other services to us, the remaining 147,540 DSUs are scheduled to vest on February 25, 2025.

53

Effective
as of June 30, 2022, restricted shares of NRS’ Class B common stock were granted to certain NRS employees. The restrictions on
the shares lapse in three installments, the first was on June 1, 2024, and the others are June 1, 2026 and June 1, 2027. The estimated
fair value of the restricted shares on the grant date was $3.3 million, which is being recognized over the vesting period. As of July
31, 2024, unrecognized compensation cost related to NRS’ non-vested Class B common stock was an aggregate of $1.9 million. The
unrecognized compensation cost is expected to be recognized over the remaining vesting period that ends in fiscal 2027.

nm—not
meaningful

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

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

Benefit
from (Provision for) Income Taxes. With our reacquisition of net2phone in March 2006, its losses were limited under IRC Section 382
to approximately $7 million per year. In fiscal 2024, we had an IRC Section 382 study conducted on the reacquisition and the limitation
was adjusted to $9 million per year. We recorded a tax benefit related to the adjusted amount of $23.6 million in fiscal 2024. The change
in income tax expense in fiscal 2024 compared to fiscal 2023, excluding the income tax benefit in fiscal 2024, was primarily due to differences
in the amount of taxable income earned in the various taxing jurisdictions.

Net
Income Attributable to Noncontrolling Interests. The change in the net income attributable to noncontrolling interests in fiscal
2024 compared to fiscal 2023 was primarily due to changes in amounts attributable to the noncontrolling interests in the VIE and net2phone
2.0, partially offset by the change in the amounts attributable to the noncontrolling interests in NRS.

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, 2024 will be sufficient to meet our currently anticipated working capital and capital
expenditure requirements during fiscal 2025.

At
July 31, 2024, we had cash, cash equivalents, debt securities, and current equity investments of $193.0 million and working capital (current
assets in excess of current liabilities) of $143.2 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, 2024, “Cash and cash equivalents” in our consolidated balance
sheet included an aggregate of $55.9 million held by IDT Payment Services, Inc. and IDT Payment Services of New York, LLC that was unavailable
for other purposes.

54

Contractual
Obligations and Commitments

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

Consolidated
Financial Condition

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 $48.6 million at July 31, 2024 from $37.7 million at July 31, 2023 primarily due to amounts billed
in fiscal 2024 that were greater than collections during fiscal 2024, partially offset by changes in foreign currency exchange rates.

Deferred
revenue arises from sales of prepaid products and varies from period to period depending on the mix and the timing of revenues. Deferred
revenue decreased to $30.4 million at July 31, 2024 from $35.3 million at July 31, 2023 primarily due to decreases in the BOSS Revolution
and IDT Digital Payments deferred revenue balances.

Customer
deposit liabilities at IDTFS decreased to $83.0 million at July 31, 2024 from $86.5 million at July 31, 2023. Our restricted cash and
cash equivalents included $83.3 million and $87.3 million at July 31, 2024 and 2023, respectively, held by the bank.

In
September 2017, we and certain of our subsidiaries were certified by the 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.

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 was paid in five monthly invoice deductions of $0.4
million each.

55

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

Investing
Activities

Our
capital expenditures were $18.9 million in fiscal 2024 and $22.0 million in fiscal 2023. We currently anticipate that total capital expenditures
in fiscal 2025 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.

In
fiscal 2024 and fiscal 2023, each of the EMI’s shareholders including us agreed to purchase additional shares of the EMI’s
convertible preferred stock. In fiscal 2024 and fiscal 2023, we paid an aggregate of $2.0 million and $0.8 million, respectively, to
purchase the additional shares. 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 EMI’s convertible preferred stock.

As
of August 22, 2024, the EMI’s shareholders including us agreed to purchase additional shares of the EMI’s convertible preferred
stock. We subscribed to purchase additional shares through January 2025 for an aggregate of $0.9 million. In August 2024, we paid $0.4
million to purchase additional shares.

Purchases
of debt securities and equity investments were $29.9 million and $59.9 million in fiscal 2024 and fiscal 2023, respectively. Proceeds
from maturities and sales of debt securities and redemptions of equity investments were $50.1 million and $49.2 million in fiscal 2024
and fiscal 2023, respectively.

Financing
Activities

In
March 2024, our Board of Directors initiated a quarterly cash dividend of $0.05 per share on our Class A and Class B common stock. In
fiscal 2024, we paid aggregate cash dividends of $2.5 million on our Class A and Class B common stock. In September 2024, our Board of
Directors declared a dividend of $0.05 per share to holders of our Class A and Class B common stock. The dividend was paid on October
7, 2024 to stockholders of record as of the close of business on September 30, 2024.

We
distributed cash of $0.1 million and $0.3 million in fiscal 2024 and fiscal 2023, respectively, to the noncontrolling interests in certain
of our subsidiaries.

In
fiscal 2023, we received proceeds from notes payable of $0.3 million, and we repaid notes payable of $2.0 million.

Our
subsidiary, IDT Telecom, Inc., or IDT Telecom, entered into a credit agreement, dated as of May 17, 2021, with TD Bank, N.A. for a revolving
credit facility for up to a maximum principal amount of $25.0 million. As of July 15, 2024 and July 28, 2023, IDT Telecom and TD Bank,
N.A. amended certain terms of the credit agreement. IDT Telecom may use the proceeds to finance working capital requirements and for
certain closing costs of the facility. At July 31, 2024 and 2023, there were no amounts outstanding under this facility. In fiscal 2024
and fiscal 2023, IDT Telecom borrowed and repaid an aggregate of $32.9 million and $27.4 million, respectively, under the facility. The
revolving credit facility is secured by primarily all of IDT Telecom’s assets. The principal outstanding bears interest per annum
at the secured overnight financing rate published by the Federal Reserve Bank of New York plus 10 basis points, plus depending upon IDT
Telecom’s leverage ratio as computed for the most recent fiscal quarter, 125 to 175 basis points. Interest is payable monthly,
and all outstanding principal and any accrued and unpaid interest is due on May 16, 2026. IDT Telecom pays a quarterly unused commitment
fee of 10 basis points on the average daily balance of the unused portion of the $25.0 million commitment. IDT Telecom is required to
comply with various affirmative and negative covenants as well as maintain certain targets based on financial ratios during the term
of the revolving credit facility. As of July 31, 2024, IDT Telecom was in compliance with all of the covenants.

56

In
the first quarter of fiscal 2025 through October 7, 2024, IDT Telecom borrowed and repaid an aggregate of $14.2 million under the facility.

In
January 2024, the restrictions lapsed on the 0.5 million restricted shares of net2phone 2.0 Class B common stock that were granted in
December 2020 to each of Howard S. Jonas and Shmuel Jonas, our Chief Executive Officer, and Bill Pereira was granted 50,000 shares of
net2phone 2.0 Class B common stock. We repurchased a portion of these shares representing an aggregate of 4.5% of the outstanding shares
of net2phone 2.0 with an aggregate fair value of $3.6 million to satisfy the grantees’ tax withholding obligations in connection
with the lapsing of restrictions on restricted stock or the grant of shares. In addition, in connection with the vesting of restricted
shares of NRS Class B common stock on June 1, 2024, we repurchased a portion of the shares representing an aggregate of 0.17% of the
outstanding shares of NRS with an aggregate fair value of $0.6 million to satisfy the grantees’ tax withholding obligations in
connection with the lapsing of restrictions on restricted stock.

In
each of fiscal 2024 and fiscal 2023, we received cash from the exercise of stock options of $0.2 million for which we issued 12,500 shares
of our Class B common stock in each of the periods.

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 2024, we repurchased 298,421
shares of Class B common stock for an aggregate purchase price of $9.1 million, and in fiscal 2023, we repurchased 511,546 shares of
Class B common stock for an aggregate purchase price of $13.1 million. At July 31, 2024, 4.4 million shares remained available for repurchase
under the stock repurchase program.

In
the first quarter of fiscal 2025 through October 7, 2024, we repurchased 37,714 shares of our Class B common stock for an aggregate purchase
price of $1.3 million.

In
fiscal 2024 and fiscal 2023, we paid $1.5 million and $0.8 million, respectively, to repurchase 41,994 and 28,227 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 vesting of DSUs, the lapsing of restrictions on restricted stock shares, and shares issued for bonus payments. Such shares were
repurchased by us based on their fair market value as of the close of business on the trading day immediately prior to the vesting date.

In
June 2024, we exchanged an aggregate of 12,267 shares of our Class B common stock with a value of $0.4 million for shares of NRS’
Class B common stock that were held by employees of NRS representing an aggregate of 0.09% of NRS’ outstanding shares. In January
2024, we exchanged an aggregate of 192,433 shares of our Class B common stock with a value of $6.3 million for shares of NRS’ Class
B common stock that were held by management employees of NRS representing an aggregate of 1.25% of NRS’ outstanding shares.

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.