IDT's Q4 2025 Earnings Call: Contradictions Emerge on AI Agent Sales Strategy, M&A, International Expansion, and Market Outlook

The above is the analysis of the conflicting points in this earnings call

Date of Call: None provided

Financials Results

• Revenue: Q4 consolidated revenue up 3% YOY; FY2025 revenue up 2% (first full-year increase since 2021)
• Gross Margin: Consolidated gross margin up 310 bps YOY in Q4; up 380 bps for FY2025

Guidance:

• FY2026 consolidated adjusted EBITDA (ex-stock comp) expected at $141–$145M (+7% to +10% YOY vs $131.7M).
• NRS targeting FY2026 revenue growth of 20%–25%; EBITDA to grow faster than revenue.
• BOSS Money revenue and adjusted EBITDA expected to grow in the high teens.
• net2phone revenue lift from AI agents; EBITDA growth to trail revenue, in high single digits, due to increased investment.
• Traditional communications gross profit and adjusted EBITDA to decline single-digit percentages.
• Adjusted EBITDA definition revised to exclude non-cash comp starting FY2026.

Business Commentary:

• Record Adjusted EBITDA and Segment Growth:
• IDT Corporation reported a record adjusted EBITDA of $129 million for fiscal 2025, representing a 43% increase.

• This growth was driven by double-digit adjusted EBITDA expansion at each operating segment, including NRS, FinTech, and net2phone.

• Merchant Services and SaaS Fee Revenue Boost, Nevertheless a Modest Churn Increase:

• Merchant services and SaaS fee revenue drove top-line growth at NRS, with recurring revenue per terminal reaching $299 in the fourth quarter.

• Despite this growth, the company reported a modest increase in churn due to factors such as immigration enforcement, competitive pressures, and technical issues.

• BOSS Money Digital Channel Expansion and Upcoming Tax Impact:

• BOSS Money's digital channel contributed over 80% of remittance volume, with a 41% increase in cash sent in the fourth quarter.

• The upcoming 1% federal tax on remittances is expected to accelerate the migration to digital channels, benefiting IDT's digital remittance business.

• Investment in AI and Machine Learning, Shifting Revenue Model:

• IDT is investing in AI-driven efforts to improve remittance services and customer experience, with AI agents now involved in 10% of net2phone sales conversations.
• The company plans to shift its revenue model from a seat-based to a usage-based model, aiming for significant revenues and high margins as AI agentic offerings become more widespread.

Sentiment Analysis:

• Management reported record FY2025 adjusted EBITDA up 43% to $128.7M, exceeding guidance, and guided another increase for FY2026 to $141–$145M. High-margin segments (NRS, FinTech, net2phone) expanded, lifting consolidated gross margin. While noting headwinds (immigration policy, NRS churn, and traditional communications declines), they emphasized strong digital growth in BOSS Money, rising NRS recurring revenue per terminal, and new AI-driven products at net2phone.

Q&A:

• Question from Anigo Alonso (Morum Capital): What is the progress on stablecoins and Visa-linked wallets mentioned last call, given industry volatility?
  Response: Wallets are in beta with some customers; stablecoins are expected to become significant over time, but no material impact yet.

• Question from Anigo Alonso (Morum Capital): What is the WhatsApp launch timing?
  Response: Launching within days for existing customers, with rollout to new customers in 30–45 days.

• Question from Anigo Alonso (Morum Capital): Will wallets be available inside the app?
  Response: Yes—wallet support in the app is planned.

• Question from Anigo Alonso (Morum Capital): Could the Western Union–Intermex deal face regulatory hurdles?
  Response: Management declined to speculate on regulatory outcomes.

• Question from Anigo Alonso (Morum Capital): Have M&A prospects changed after recent developments, and are valuations attractive?
  Response: Opportunities remain but sector valuations haven’t broadly improved; premiums exist for select deals—outlook is nuanced.

• Question from Anigo Alonso (Morum Capital): What are the top organic investment priorities this year?
  Response: They will focus on efficient, creative customer acquisition, avoiding specifics to maintain competitive advantage.

• Question from Anigo Alonso (Morum Capital): Will net2phone shift from seat-based to usage-based pricing?
  Response: AI agents and AI coach will be usage-based; UCaaS/CCaaS remain seat-based.

• Question from William Vaughn (Coriant): What is driving the uptick in NRS terminal churn?
  Response: Store closures from immigration enforcement, competitive poaching, card scheme compliance issues causing confusion, and a now-resolved technical issue.

• Question from William Vaughn (Coriant): Are new NRS competitors startups or legacy players?
  Response: Both—legacy solutions like Clover and upstarts with attractive UIs; many customers return after unmet expectations.

• Question from William Vaughn (Coriant): Can BOSS Money sustain its strong digital growth rate?
  Response: Growth likely moderates as the market matures and immigration policy tightens, but new initiatives (wallets, WhatsApp) and the 1% tax shift to digital support continued gains; FY2026 budget assumes teens growth.

• Question from William Vaughn (Coriant): Will future M&A skew smaller or larger?
  Response: More likely smaller deals; near term emphasis is on organic build and internal investment rather than large acquisitions.