UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K

☒ Annual report pursuant to section 13 or 15(d) of the securities exchange act of 1934 for the fiscal year endedJuly 31 2017, 2023.

or

☐ Transition report pursuant to section 13 or 15(d) of the securities exchange act of 1934.

Commission File Number: 1-16371

IDT Corporation

(Exact name of registrant as specified in its charter)

520 Broad Street,Newark, New Jersey07102

(Address of principal executive offices, zip code)

(973)438-1000

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:

Securities registered pursuant to section 12(g) of the Act: None

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ☐ No ☒

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes ☐ No ☒

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes ☒ No ☐

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§229.405 of this chapter) is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report. ☒

If securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant included in the filing reflect the correction of an error to previously issued financial statements. ☐

Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based compensation received by any of the registrant’s executive officers during the relevant recovery period pursuant to §240.10D-1(b). ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes ☐ No ☒

The aggregate market value of the voting and non-voting stock held by non-affiliates of the registrant, based on the adjusted closing price on January 31, 20172023 (the last business day of the registrant’s most recently completed second fiscal quarter) of the Class B common stock of $19.20$29.39 per share, as reported on the New York Stock Exchange, was approximately $390.7$599.4 million.

As of October 9, 2017,11, 2023, the registrant had outstanding 23,267,08123,587,244 shares of Class B common stock and 1,574,326 shares of Class A common stock. Excluded from these numbers are 2,298,4674,277,772 shares of Class B common stock and 1,698,000 shares of Class A common stock held in treasury by IDT Corporation.

DOCUMENTS INCORPORATED BY REFERENCE

The definitive proxy statement relating to the registrant’s Annual Meeting of Stockholders, to be held December 14, 2017,13, 2023, is incorporated by reference into Part III of this Form 10-K to the extent described therein.

Index

IDT Corporation

Annual Report on Form 10-K

Part I

As used in this Annual Report, unless the context otherwise requires, the terms the “Company,” “IDT,” “we,” “us,” and “our” refer to IDT Corporation, a Delaware corporation, its predecessor, International Discount Telecommunications, Corp., a New York corporation, and its subsidiaries, collectively. Each reference to a fiscal year in this Annual Report refers to the fiscal year ending in the calendar year indicated (for example, fiscal 20172023 refers to the fiscal year ended July 31, 2017)2023).

Item 1. Business.

OVERVIEW

IDT is a provider of point-of-sale terminal-based solutions, international money remittance and other financial technology, or fintech businesses, cloud communications and traditional communications services. Our businesses leverage common strategic assets to serve differentiated markets with innovative offerings.

Our consumer businesses make it easier for families to connect, support and share across international borders. We are a multinational holding companyalso enable businesses to transact and communicate with operationstheir customers with enhanced intelligence and insight.

IDT’s key businesses are:

IDT also operates other, small businesses and offerings including early-stage business initiatives and mature businesses in harvest mode.

SEGMENT REPORTING

We have four reportable business segments: (1) National Retail Solutions, or NRS; (2) Fintech; (3) net2phone; and (4) Traditional Communications.

As of August 1, 2022, our National Retail Solutions business was reclassified to the telecommunicationsNRS segment from the 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 payment industries.restated in all periods to conform to the current period presentation.

Since our inception, we have derived the majorityThe NRS segment, which contributed revenue of our revenues$77.1 million in fiscal 2023 and operating expenses from IDT Telecom’s businesses, with IDT Telecom’s revenues representing 99.8%$51.3 million in fiscal 2022 (6.2% and 3.8% of our total revenues, respectively) comprises our NRS business.

The Fintech segment, which contributed revenue of $86.6 million in fiscal 2017.2023 and $64.6 million in fiscal 2022 (7.0% and 4.7% of our total revenues, respectively), comprises our BOSS Money remittance business and other, significantly smaller, financial services businesses, offerings and technologically innovative initiatives.

The net2phone segment, which contributed revenue of $72.4 million in fiscal 2023 and $58.2 million in fiscal 2022 (5.8% and 4.3% of our total revenues, respectively), comprises unified communications as a service, or UCaaS, offered under net2phone’s Unite Brand, contact center as a service, or CCaaS, offered under its uContact brand, and other offerings that leverage the cloud to enable intelligent business communications.

The Traditional Communications segment, which contributed revenue of $1,002.7 million in fiscal 2023 and $1,190.0 million in fiscal 2022 (81.0% and 87.2% of our total revenues, respectively) includes IDT Telecom’s primary businesses marketDigital Payments, BOSS Revolution Calling, and distribute multiple communications and payment services across four verticals comprising multiple, related offerings:

Our Retail Communications vertical provides prepaid international long distance calling services primarily to foreign-born and underbanked consumers in the United States, with smaller retail operations serving customers in Europe, Asia, South America and Canada. Retail Communications offerings include our flagship ‘Boss Revolution’ branded PIN-less international long distance prepaid calling offeringsIDT Global, as well as traditional, disposable hard cards sold under a variety of brands. In the United States, the majority of our customers purchase Retail Communicationsother small businesses and offerings through one of our more than 35,000 Boss Revolution authorized resellers. These resellers are typically small, independent retailers serving foreign-born communities. Boss Revolution customers can also purchase calling services directly through our IVR (Interactive Voice Response) system, website (www.bossrevolution.com), or mobile calling app available free on both the iTunes App Storeincluding early-stage business initiatives and Google Play.mature businesses in harvest mode.

Our Wholesale Carrier Services business terminates international long-distance calls for our retail customers and for other telecommunications companies, service providers, and resellers around the world. Our wholesale telecommunications network is comprised of interconnections that link virtually every country and significant carrier in the world.

Our Payment Services vertical includes international mobile top-up (IMTU) offerings sold through our retail network or directly from the Boss Revolution online/mobile platform and Boss Revolution Money app, our Boss Revolution international money transfer service and our National Retail Solutions business. IMTU is sold under the Boss Revolution brand as well as through mobile operator top-up cards sold by Boss Revolution resellers. Our Boss Revolution international money transfer business includes remittances from the United States to over 30 countries. It is offered through certain Boss Revolution resellers as well as the Boss Revolution online/mobile platform and Boss Revolution Money app.

Our National Retail Solutions, or NRS, business is also part of our Payment Services vertical and provides point of sale (POS) terminals and services linked to those terminals - including consumer rewards programs, credit card processing and coupon program participation - to independent retailers in the United States.

Our Unified Communications as a Service vertical includes voice over Internet protocol (VoIP) based cloud offerings under the net2phone brand including Session Initiation Protocol, or SIP, trunking and hosted private branch exchange, or PBX, services offered to enterprise customers exclusively through value-added resellers (VARs), service providers, telecom agents and managed service providers, as well as residential telephony and hosted PBX services provisioned to cable television providers.

In addition, IDT Telecom operates a business that provides bundled local/long distance residential phone service in 11 states under the brand name IDT America.

Outside of our core telecommunications business, we also hold commercial real estate including our headquarters building and associated public garage in Newark, New Jersey, an office/data center building in Piscataway, New Jersey, and a portion of a building in Jerusalem, Israel that hosts offices for us and our affiliates. Additionally, we own interests in clinical and early stage pharmaceutical companies Rafael Pharmaceuticals, Inc. (formerly Cornerstone Pharmaceuticals, Inc.) and Lipomedix Pharmaceuticals Ltd.

Financial information by segment is presented in Note 24 in the Notes2 to our Consolidated Financial Statements in Item 8 to Part II of this Annual Report.

Our headquarters areis located at 520 Broad Street, Newark, New Jersey 07102. The main telephone number at our headquarters is (973) 438-1000 and our corporate web site’swebsite’s home page is www.idt.net.

We make available free of charge our annual reportreports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and all amendments to these reports, and all beneficial ownership reports on Forms 3, 4 and 5 filed by directors, officers and beneficial owners of more than 10% of our equity through the investor relations page of our web sitewebsite (http://ir.idt.net/) as soon as reasonably practicable after such material is electronically filed with the Securities and Exchange Commission. Our web sitewebsite also contains information not incorporated into this Annual Report on Form 10-K or our other filings with the Securities and Exchange Commission.

KEY EVENTS IN OUR HISTORY

1990 – Howard S. Jonas, our founder, launchedlaunches International Discount Telephone to provide international call re-originationsre-origination services.

1995 – We beganbegin selling wholesale carrier services to other long-distance carriers by leveraging our access to favorable international telephone rates generated by our retail calling traffic.

1996 – We successfully complete an initial public offering of our common stock.

1997 – We began marketing prepaid calling cards to provide convenient and affordable international long distance calls primarily to immigrant communities.

2000 – We complete the sale of a stake in our net2phone subsidiary, a pioneer in the development and commercialization of Voice over Internet Protocol, or VoIP, technologies and services, to AT&T for approximately $1.1 billion in cash. We subsequently repurchased net2phone from AT&T.

2001 – Our common stock is listed on the New York Stock Exchange, or NYSE.

2004 – We launch a retail energy business to provide electricity and natural gas to residential and small business customers in New York.

2006 – We sell our Russian telecom business, Corbina, for $129.9 million in cash.

– We launch a regulated issuing bank based in Gibraltar.

2007 – We complete the sale of IDT Entertainment to Liberty Media for (i) 14.9 million shares of our Class B common stock, (ii) Liberty Media’s approximate 4.8% interest in IDT Telecom, (iii) $220.0 million in cash, net of certain working capital adjustments, (iv)stock and other considerations.

2008 –We launch BOSS Revolution PIN-less, a pay-as-you-go international calling service. BOSS Revolution has since become our flagship brand, and the repayment of $58.7 million of IDT Entertainment’s intercompany indebtedness payableBOSS Revolution platform has expanded to us and (v) the assumption of all of IDT Entertainment’s existing indebtedness.include payment offerings.

2009 – We purchasespin-off our CTM Media Holdings subsidiary to our stockholders. CTM Media Holdings has been renamed IDW Media Holdings, Inc. and its stock is traded on the NYSE American with the ticker symbol “IDW”.

2011 – We spin-off our Genie Energy Ltd. Subsidiary, which provides electricity and natural gas and related services to residential and business customers in the United States and overseas. Genie Energy’s common stock is listed on the NYSE with the ticker symbol “GNE”.

2013 – We spin-off our subsidiary, Straight Path Communications, Inc., or Straight Path, including its wireless spectrum holdings, to our stockholders. Straight Path was purchased in February 2018 by Verizon Communications Inc.

2014 – We sell our stake in Fabrix Systems, a pioneer in cloud storage and network delivery technologies, to Ericsson for $69 million.

2015 – net2phone launches its UCaaS offering in the United States.

2016 – We spin-off our majority interest in Fabrix Systems Ltd., or Fabrix.

– We purchaseour Zedge subsidiary to our stockholders. Zedge provides a majority stake in Zedge, Inc. (formerly Zedge Holdings, Inc.), or Zedge, which provides one of the most popular content platformsplatform for mobile device personalization including ringtones, wallpapers, home screen icons and notification sounds. Zedge’s stock is listed on the NYSE American with the ticker symbol “ZDGE”.

20082017 – We enter the oilintroduce our BOSS Money app for Android and gas exploration business and are granted a license to explore for oil shale in Israel.iOS.

– We launch Boss Revolution PIN-less, a pay-as-you-go international calling service. Boss Revolution has since become our flagship brand, and the Boss Revolution platform has been expanded to include payment offerings.

20092018 – We spin-off our CTM Mediainterest in our Rafael Holdings, Inc. subsidiary to our stockholders. CTM Media Holdings has been renamed IDW Media Holdings and is traded on the over-the-counter market with the ticker symbol “IDWM”.

2011 – We spin-off our Genie Energy Ltd. subsidiary, which holds retail energy and oil and gas exploration businesses, to stockholders. Genie EnergyRafael Holdings’ stock is listed on the NYSE with the ticker symbols “GNE”symbol “RFL”.

2019 – NRS launches NRS PAY, enabling retailers to accept credit cards and “GNE-PRA”.other forms of digital payment with an affordable, easily understood rate structure and no hidden fees.

20132020 – We spin-off our Straight Path Communications, Inc. subsidiarynet2phone introduces its Huddle video conferencing solution and integration with Microsoft Teams.

2021 – net2phone launches integrations with Salesforce and Zapier among others, and HIPAA-compatible solutions for healthcare providers.

2022 – net2phone acquires Integra CCS, or Integra, a CCaaS provider operating in the Americas and Europe.

2023 – NRS expands its POS network to stockholders. Straight Path Communications is listed on the NYSE MKT with the ticker symbol “STRP”.

– We introduce the Boss Revolution mobile app for Android and iOS.

– We launch an international money transfer service on the Boss Revolution platform in select states. The service offers Boss Revolution customers a convenient, affordable means to send cash from the United States to friends and family overseas.

2014 – We sell our 78% stake in Fabrix to Ericsson for $69 million as part of Ericsson’s purchase of Fabrix for $95 million.

2015 – We become theCanada, enrolling its first U.S.-based telecommunications company to terminate international long distance voice traffic directly to Cuba.

2016 – We spin-off our Zedge, Inc. subsidiary to stockholders. Zedge is listed on the NYSE MKT with the ticker symbol “ZDGE”.

– We launch National Retail Solutions to provide Point-of-Sale (POS)-based services to independent retailers in the United States.Toronto area.

– We make- IDT Digital Payments launches Zendit, a strategicglobal prepaid-as-a-service platform.

OUR STRATEGY

Since our inception more than 30 years ago, we have generated strong returns for our stockholders by incubating high-growth businesses with investment in Cornerstone Pharmaceuticals, subsequently renamed Rafael Pharmaceuticals, a privately held, clinical-stage, metabolic oncology therapeutics company focused on treating somecapital provided by our more mature, cash-generating businesses. As these growth businesses scaled, we have monetized many of the most challenging cancers including pancreatic, acute myeloid leukemia (AML), and T-cell lymphoma.them through sales or spin-offs to our stockholders.

2017 – We entered into an agreement to sell our Gibraltar-based bank and e-money issuer, IDT Financial Services, which provides prepaid card solutions across the European Economic Area, for approximately $18 million.

RECENT STRATEGIC DEVELOPMENTS

In August 2015, our Board of Directors approved a plan to reorganize us into three separate entities by spinningTo date, we have spun off two non-core business units and certain assets,five publicly traded companies, one of which was Zedge, to our stockholders, which we completed on June 1, 2016. Throughout fiscal 2017, we prepared to spin off additional non-core assets including our interests in two clinical and early stage pharmaceutical companies - Rafael Pharmaceuticals and Lipomedix Pharmaceuticals Ltd. - and our real estate holdings to our shareholders as Rafael Holdings, Inc. In addition, we intend to contribute $50 million to $60 million in cash to Rafael Holdings, Inc. prior to the spin-off.subsequently sold:

DIVIDENDS AND DISTRIBUTIONS

We have made quarterly distributions to the holders of our Class A and Class B common stock since fiscal 2011. In fiscal 2017, we paid aggregate cash dividends of $0.76 per share on our Class A common stock and Class B common stock, or $17.9 million in total as detailed below. In fiscal 2016, we paid aggregate cash dividends of $0.75 per share on our Class A common stock and Class B common stock, or $17.4 million in total.

On September 28, 2017, we declared a dividend of $0.19 per share for the fourth quarter of fiscal 2017 to holders of our Class A common stock and Class B common stock. The dividend will be paid on or about October 20, 2017 to stockholders of record as of the close of business on October 16, 2017.

We expect to continue making distributions commensurate with our cash generation and financial resources, business outlook and growth strategy, as they may be impacted by significant current or anticipated developments.

OUR STRATEGY

History and Background

Since our founding, we have focused on value creation by leveraging potentially disruptive telecommunications, payment and other technologies to challenge entrenched business models. Outside of our core businesses, we sought to select and incubate promising early stage businesses and, in some cases, have sold those businesses or spun them off to our stockholders.

In 2007 and 2008, in response to a long-term, industry-wide decline in the sale of prepaid, disposable calling cards, which was our dominant offering at the time, we initiated a fundamental restructuring of our businesses. We right-sized corporate overhead, reduced network costs at IDT Telecom, streamlined our operations, and refocused on the growth and profitability of our core telecommunications businesses. We subsequently spun off certain non-core businesses and assets to our stockholders, including CTM Media (2009)Genie Energy, Ltd. (NYSE: GNE), Genie Energy (2011), Straight Path Communications (2013), and Zedge (2016). In October 2014, we completed the sale of our interest in Fabrix, a network storage and processing technology business, to Ericsson for $69 million in cash as part of Ericsson’s purchase of Fabrix for $95 million.

In 2017, we entered into an agreement to sell our IDT Financial Services Holdings Limited subsidiary, a Gibraltar-based bank and e-money issuer across the European Economic Union, to JAR Fintech Limited, for approximately $18 million, which we expect to close in calendar 2017.

Within IDT Telecom, we reduced the cost of our infrastructure while leveraging our VoIP expertise and large retail network to develop new products and services. We also sharpened our retail focus to provide high-quality, cost-effective communications and payment services primarily to foreign-born consumers. This is a historically underserved market that includes significant numbers of unbanked and under-banked consumers.

As part of our effort to meet the changing demands of our target demographic, in 2008 we launched Boss Revolution PIN-less, a pay-as-you-go international long-distance voice service. The service grew rapidly and eventually overtook sales of our traditional, disposable prepaid calling cards. We believe that Boss Revolution PIN-less has become the nation’s leading pay-as-you-go international calling service. We subsequently developed and introduced complementary payment services over the Boss Revolution platform, including international and domestic airtime top-up, gift cards, domestic bill payment and an international money transfer service. These additions represent significant milestones toward our goal of offering a comprehensive suite of voice and payment products under a single, global brand and platform targeted to under-banked, foreign-born consumers.

To simplify the Boss Revolution PIN-less calling experience and extend its reach, we introduced our Boss Revolution Calling mobile app in 2013. The app is free to the consumer and is distributed through both the iTunes and Google Play app stores. In 2017, we introduced a Boss Revolution retailer portal that can be accessed via the web browser on a mobile device to enable any qualified individual in the United States with an Android or iOS smartphone to become a Boss Revolution retailer and to manage their Boss Revolution account virtually anywhere, anytime. In 2017, we introduced the BOSS Revolution Money app, which works seamlessly with the Boss Revolution calling app to let customers send money transfers, mobile airtime top-up and electronic gift cards to family and friends easily and securely.

Leveraging the high volumes of traffic to certain overseas destinations generated by our retail business, we have long been a significant operator in the global wholesale telecommunications market, carrying and terminating international calling traffic on behalf of other telecommunications companies and call aggregators. More recently, we have maintained our leadership in the wholesale market by leveraging VoIP technology and broadening our offerings with different levels of service quality.

In 2015, we refocused our net2phone division to provide cloud-based communications to small and medium-sized businesses. Unlike most other competitors in this space, net2phone works exclusively through the agent channel, provisioning its service through third-party technology providers and other value-added resellers.

Recent Strategic Developments

In August 2015, our Board of Directors approved a plan to reorganize us into three separate entities by spinning off two non-core business units and certain assets, one of which was Zedge, to our stockholders, which we completed on June 1, 2016. Throughout fiscal 2017, we prepared to spin off additional non-core assets including our interests in two clinical and early stage pharmaceutical companies - Rafael Pharmaceuticals and Lipomedix Pharmaceuticals Ltd. - and our real estate holdings to our shareholders as Rafael Holdings, Inc. In addition, we intend to contribute $50 million to $60 million in cash to Rafael Holdings, Inc. prior to the spin-off.

IDT Telecom

IDT Telecom’s largest offerings, including its Boss Revolution prepaid PIN-less calling services and wholesale termination business, face intense competitive pressures on revenues and margins. In response, IDT Telecom is pursuing a multi-pronged strategy that includes:

BUSINESS DESCRIPTIONToday, we operate a portfolio of inter-related businesses that we’ve built by leveraging our strategic assets. These assets include:

IDT TELECOM

IDT Telecom reports financialThe development of our high-margin, high-growth businesses—NRS, net2phone, and operational resultsBOSS Money—has been, and in three reportable segments: Telecom Platform Services, Unifiedsome cases continues to be, financed with growth capital from the cash flows generated by the more mature businesses within our Traditional Communications as a Service, and Consumer Phone Service. Since our inception,segment. Consequently, we have derivedavoided debt financing and dilutive capital raises.

The key businesses in our Traditional Communications segment are:

These offerings participate wholly or partially in the majoritypaid-minute voice communications market. Like other operators in this market, these businesses, and particularly our BOSS Revolution Calling and IDT Global businesses, are subject to intense revenue and margin pressure as consumers continue to migrate to free over-the-top voice and messaging services and to flat-rate international long-distance plans. We have worked to counter the impacts of these trends by continually innovating and deploying new features and enhancements to augment the contributions of these offerings while reducing their associated overhead and operating expenditures. For instance, BOSS Revolution Calling and IDT Digital Payments benefited from a gradual rotation to digital channels with higher per-unit margins following the introduction of our revenuesBOSS Revolution Calling and operating expensesBOSS Money apps. To date, these efforts have significantly offset the bottom-line impacts of the paid-minute voice market’s decline. Nevertheless, we expect that the cash-flows generated by the BOSS Revolution Calling and IDT Global businesses will decline appreciably in the coming years as the overall paid communications market continues its decline.

The increasing revenue and gross margin contributions from IDT Telecom’s businesses. In fiscal 2017, IDT Telecom had revenues of $1,499.0 million, representing 99.8%our high-margin growth businesses in combination with our efforts to maximize the cash generation of our totallower margin, more mature offerings have enabled us to improve our consolidated bottom-line performance in recent years and to return value to stockholders through purchases of our Class B common stock.

BUSINESS DESCRIPTION

National Retail Solutions

NRS generated $77.1 million in revenues and income from operations of $23.6$14.4 million in fiscal 2023, as compared with revenues of $1,484.8$51.3 million and income from operations of $32.4$11.2 million in fiscal 2016.2022.

TELECOM PLATFORM SERVICESNRS operates a network of POS terminals at independent retailers including convenience stores, bodegas, and other independent retailers throughout the United States. The NRS solution includes integrated hardware and software tools that enable these retailers to operate more efficiently and compete more effectively against larger retail chains.

Our Telecom Platform Services segment,

The POS terminal’s hardware includes a cash register, barcode scanner, retailer and customer-facing hi-definition screens, a receipt printer, and a credit card reader. NRS’ integrated, proprietary software is offered to retailers as a service and provides operational tools including inventory management, sales tracking, price book management, and other useful features. NRS technology teams in the United States and Israel continuously enhance the software and develop new features to better serve existing customers and facilitate expansion into additional retail market segments.

The primary market for NRS’ POS terminals is the more than 200,000 independently owned convenience, liquor, grocery, and tobacco stores in the United States, many of which represented 97.5%primarily serve foreign-born communities in urban areas.

NRS continues to increase the number of POS terminals active in its network. As of July 31, 2023, the NRS POS network included approximately 25,700 terminals, an increase from 19,400 a year earlier. NRS’ POS terminal sales and 97.0%marketing efforts are targeted, in part, to our nationwide network of our total consolidated revenues in fiscal 2017 and fiscal 2016, respectively,BOSS Revolution retailers. NRS also markets and distributes multiplesells to retailers through direct sales and strategic relationships with more than 100 wholesale distributors including some of the largest cash-and-carry wholesalers in the United States.

NRS generates revenue from a portfolio of services for both retailers and third parties. The vast majority of revenue is generated by recurring services including:

In addition to these recurring sources of revenue, NRS sells its POS terminals to retailers. Terminals are typically offered at a discount from the full retail price when retailers enroll in NRS PAY.

NRS also supports our BOSS communications and payment services across three business verticals:offerings – BOSS Revolution Calling, BOSS Money remittances, and IDT Digital Payments, all of which can be sold and provisioned by retailers directly from their NRS terminals.

We believe that NRS’ competitive advantages include:

NRS’ growth strategy includes:

Competition

NRS’ principal competitors in our target market of independent convenience stores, including bodegas, and other small format retailers including liquor and tobacco stores, are significantly smaller and primarily local or regional. These regional players generally do not offer a comparable suite of POS services, have limited capacity to scale their platforms, and/or are not price competitive.

Nationwide POS platform service providers, including Square, Toast, Lightspeed, Clover, and NCR, primarily serve retail chains or are focused on other segments, such as sit-down restaurant chains.

Fintech

Fintech is comprised of BOSS Money and other, significantly smaller, financial services businesses. Fintech revenues were $86.6 million in fiscal 2023 compared to $64.6 million in fiscal 2022. Fintech’s loss from operations was $2.5 million in fiscal 2023 compared to $6.9 million in fiscal 2022. BOSS Money revenues were $76.9 million in fiscal 2023, an increase of 38.5% from revenues of $55.6 million in fiscal 2022.

BOSS Money enables customers in the United States to send money conveniently and affordably to third parties around the world. International remittances are a primary economic activity for the tens of millions of first- and second-generation immigrants in the United States. According to the World Bank, total remittances from the United States topped $79 billion in 2022. At July 31, 2023, BOSS Money provided its remittance service from the United States to 47 countries through approximately 1,100 payer entities. Its payout network included over 237,000 cash payout locations worldwide in addition to bank deposits, mobile money wallets, credit to debit cards, and home delivery payout options.

BOSS Money is offered directly to consumers via our digital channels including the BOSS Money app, the BOSS Revolution Calling app, and the BOSS Money consumer website. Our retail channel comprises licensed and authorized BOSS Money agents nationwide.

During fiscal 2023, approximately 80% of BOSS Money’s transactions originated on our digital channels, predominantly in the BOSS Money app. The BOSS Money app enables customers with a debit or credit card to send money easily and securely directly from an iOS or Android device.

The BOSS Money retail network affords unbanked and underbanked customers the ability to initiate transactions with cash as well as with a debit or credit card. We continue to build our retail origination network by using our internal sales force to recruit new BOSS Money retailers, primarily focusing on retailers that already provision BOSS Revolution Calling and IDT Digital Payments. In order to provide our service, BOSS Money retailers must meet certain stringent financial and other regulatory qualifications. We also continue to enhance the BOSS Money retailer portal and platform to make the transaction more convenient for retailers, the majority of whom host multiple remittance providers.

We continue to expand our BOSS Money customer base at rates well above the domestic remittance industry’s average by focusing our marketing efforts on converting the large BOSS Revolution customer base, as well as by targeting new customers directly, primarily through attractive fee and foreign exchange rate offers, through both our digital and retail channels.

BOSS Money generates revenues from a per-transaction fee charged to the customer and from foreign exchange differentials. Our transaction costs include commissions paid when the transaction is initiated by a retail agent, payment to the international disbursing agent, banking, compliance, foreign currency exchange costs, and, for digital transfers, credit and debit card processing fees.

BOSS Money’s gross margins are typically higher on remittances initiated through our digital channels compared to retail channel transactions, as we pay retail agents transaction-based commissions on the latter.

Competition and Competitive Strengths

BOSS Money competes in the international money remittance space with both ‘brick and mortar’ services which operate primarily in retail locations through stores or authorized agents and with digital-only platforms. Most retailer-based originators of money transfers have now developed digital capabilities as well. Significant participants in this category include Western Union, International Money Express, Inc. (Intermex), Ria, a subsidiary of Euronet Worldwide, and MoneyGram International, Inc. Money remittance providers that compete wholly or primarily through digital channels include Xoom (a subsidiary of PayPal), WorldRemit, Remitly, Sendwave, and TransferWise.

We believe that BOSS Money’s competitive strengths include:

BOSS Money’s growth strategy includes:

We continue to compete successfully in part by migrating customers from our other BOSS offerings to BOSS Money leveraging our highly regarded BOSS brand, insights into our customers, and cross-marketing capabilities. We compete for customers outside the BOSS ecosystem primarily based on brand reputation, low fees, and competitive foreign exchange rates.

net2phone

net2phone’s revenues were $72.4 million in fiscal 2023 compared to $58.2 million in fiscal 2022. net2phone’s loss from operations was $2.8 million in fiscal 2023 compared to $11.1 million in fiscal 2022.

net2phone launched its UCaaS offering in 2015, leveraging our expertise in VoIP communications, established technology team, and global telephony network.

net2phone enables its customers to transform their communications by leveraging its cloud platform to provide solutions that enable more intelligent, flexible and adaptive communications.

net2phone’s offerings include:

net2phone operates in the United States, Canada, Latin America, the Caribbean, and Spain. Sales efforts are targeted at mid-market scale businesses, with 50 to 1000 seats.

net2phone employs a channel-partner go-to-market strategy in its markets, except in Canada. In these markets, distribution is through master agents, telecom agents, managed service providers, and value-added reseller partners. net2phone’s channel-centric approach enables it to efficiently reach its extensive target market of midsize businesses, which rely heavily on channel partners to address their IT needs. Currently, net2phone partners with over 2,000 active channel partners. net2phone’s partner channel is overseen by field-based channel sales managers employed by net2phone.

net2phone also continues to expand its direct-to-business channel in each of its markets.

net2phone’s channel partners and business customers choose its solutions because of its intuitive products, reliability, track-record of innovation, and accessibility.

net2phone’s go-to-market strategy for both channel partners and direct sales is uniquely tailored to each geographic market. net2phone delivers differentiated, local support for channel partners and end users along with customizable packages and a partner-ready portal for seamless onboarding and management. In addition, net2phone bills and supports its customers directly.

net2phone’s value proposition for its channel partners includes streamlined services bundled with and without IP phones, extensive customization capabilities, frictionless and rapid quote generation, and competitive compensation – backed by net2phone’s dedicated channel team.

Key differentiators typically include net2phone’s advanced feature sets, white glove customer service, integrations with third-party software and deep localization. net2phone’s global infrastructure, locally based sales and customer support teams and local phone numbers, porting, and native language support, all enable net2phone clients to retain the look and feel of localized customer and user experiences.

net2phone’s marketing to channel partners and end users includes search engine marketing, search engine optimization, third-party lead generation platforms, social media marketing, and other forms of demand generation. net2phone’s indirect marketing funnels through its network of partners, master agencies, and affiliates and includes tradeshows and local events, support for digital marketing and other forms of demand generation.

net2phone tracks its acquisition costs closely across both channels to ensure it is acquiring customers in a cost-efficient manner and consistent with its targets for return on investment.

net2phone’s CCaaS offering is integrated into its core marketing strategies. These include, but are not limited to, webinars, channel partner events, contact center industry-focused events, search engine optimization, and search engine marketing, layered with ongoing channel sales training, proof of concepts and demos. As CCaaS sales opportunities will lead to more enterprise deployments, net2phone plans to implement a strong presales engineering cadence to qualify, ascertain and identify the key features and functionality that such client sets require.

net2phone growth strategy includes:

During fiscal 2017, our Telecom Platform ServicesCompetitive Strengths

We believe that net2phone’s competitive strengths include:

Competition

net2phone’s most significant competitors in the UCaaS space include RingCentral, 8x8, Crexendo, Vonage, and Nextiva. Many of these companies offer more widely recognized brands, larger and more developed marketing and sales forces and/or channel agent networks, and more advanced product sets and solutions customized for specific market segments or verticals. These competitors’ offerings typically also support integration of their services with other well-known, third-party CRM vendors as well as with various Google and Microsoft applications.

The CCaaS market is fragmented, highly competitive and evolving rapidly in response to shifting consumer behavior, especially the rapid adoption of mobile devices and social media. The proliferation of mobile devices and social media is driving change in contact center technology, as customers expect seamless communication across any channel according to their preference and needs. Combined with the disruptive nature of cloud technologies, this has resulted in competitors from different market and product heritages, varying in size, breadth and scope of products and services offered. net2phone currently competes with large legacy vendors that offer on-premise contact center systems, such as Avaya and Cisco. These legacy telephony vendors are increasingly supplementing and replacing their traditional on-premise contact center systems with competing cloud offerings, through a combination of acquisitions, partnerships, and in-house development.

Additionally, net2phone competes with vendors that historically provided other contact center services and technologies and expanded to offer cloud contact center software such as NICE, Five9, and Genesys. net2phone also faces competition from many smaller contact center service providers such as Talkdesk and Seranova, as well as vendors offering both unified communications and contact center solutions. In addition, Amazon and Twilio have introduced solutions aimed at companies who wish to build their own contact centers with in-house developers. CRM vendors are also increasingly offering features and functionality that were traditionally provided by contact center service providers. CRM vendors also continue to partner with contact center service providers to provide integrated solutions and may, in the future, acquire competitive contact center service providers.

net2phone’s competitors may enjoy competitive advantages over it, including greater name recognition, longer operating histories and larger marketing budgets, as well as greater financial and/or technical resources. With the introduction of new technologies and market entrants, net2phone expects competition to continue to intensify. net2phone’s future acquisitions, if any, may subject it to new competitors and cause it to face additional and different competition in the markets served by these businesses.

Traditional Communications

Our Traditional Communications segment generated $1,464.1$1,002.7 million in revenues worldwide and income from operations of $24.4$61.3 million in fiscal 2023, as compared with revenues of $1,451.6$1,190.0 million and income from operations of $32.8$75.8 million in fiscal 2016.2022.

Traditional Communications comprises the following businesses:

Retail Communications

Retail Communications’ revenue was $610.2IDT Digital Payments

IDT Digital Payments’ revenues were $417.1 million in fiscal 20172023 compared to $664.9$473.2 million in fiscal 2016 (41.7%2022 (41.6% and 45.8%39.8% of Telecom Platform Services’ revenueTraditional Communications’ revenues in fiscal 20172023 and fiscal 2016,2022, respectively).

MostIDT Digital Payments enables customers to transfer airtime and bundles of Retailairtime, messaging, and data to recharge or ‘top-up’ a recipient’s mobile phone account internationally or domestically. Through its Zendit platform, IDT Digital Payments enables businesses, entrepreneurs, and developers to offer prepaid digital offerings including mobile airtime top-up, mobile data bundles, digital gift cards, and prepaid utility payments. The substantial majority of IDT Digital Payments’ revenue is from international mobile top-up. IDT Digital Payments offers mobile top-up for 194 different carriers in 109 countries, primarily in Latin America, the Caribbean and Africa.

IDT Digital Payments leverages our platform capabilities, our distribution reach into foreign-born communities and our relationships with mobile operators around the world.

IDT Digital Payments is sold through the BOSS platform primarily through three channels:

IDT Digital Payments’ growth drivers include deployment of additional data centric bundles to meet the growing demand for data from mobile phone customers in developing countries worldwide, cross selling to our current BOSS Revolution Calling and BOSS Money customers, further expansion into the enterprise and wholesale market as well as other regions, and the addition of new services, including enabling originators to pay for goods and services on behalf of the recipient. Additionally, we are actively pursuing the growing global digital gift card market by expanding our digital catalog to include hundreds of brands from around the world.

Competition

IDT Digital Payments’ major competitors include:

We believe that IDT Digital Payments’ competitive advantages are:

BOSS Revolution Calling

BOSS Revolution Calling’s revenues were $322.1 million in fiscal 2023 compared to $387.9 million in fiscal 2022 (32.1% and 32.6% of Traditional Communications’ sales are generated byrevenues in fiscal 2023 and fiscal 2022, respectively).

BOSS Revolution Calling is a prepaid international long-distance calling service marketed primarily to foreign-born and under-banked consumers in the BossUnited States and Canada, and a digital-only offering in Europe and Australia.

BOSS Revolution PIN-lessCalling includes our flagship ‘BOSS Revolution’ branded international calling service. Other smaller lines of business contribute to Retail Communications sales, including (1) traditional, disposablelong-distance prepaid calling service as well as disposable hard cards sold under a variety of brand names both domesticallybrands. In the United States, BOSS Revolution Calling served, as of July 31, 2023, approximately 2.1 million customers per month.

BOSS Revolution Calling is offered through our digital channels – the BOSS Revolution Calling app and overseas, (2) private labelwebsite, and IDT branded prepaid and pointthrough our extensive national network of sale activated calling cards sold to large retailers, medium sized retail chains (e.g. supermarkets, drug stores), and smaller grocery stores and similar outlets, and (3) our PennyTalk international calling service. Other revenues generated using our BossBOSS Revolution platform, including airtime top-up and international money transfer, are reflected in the Payment Services vertical discussed below.retailers.

BossBOSS Revolution PIN-lessCalling allows users to place international long-distance calls at affordable rates from the BOSS Revolution Calling app or by calling an access number. Regardless of how the call their families and friends overseas without the need to enter a personal identification number, or PIN. To place a call, a customeroriginates, our customers must first establish and top-up a Bossprepaid BOSS Revolution prepaid account. Bossaccount that is linked to their phone. Customers can open a BOSS Revolution customers can accessCalling account for free and top-up with a debit or credit card using the BOSS Revolution Calling app, through the BOSS Revolution consumer website (www.bossrevolution.com) or by phone, or with cash at any BOSS Revolution retailer. Once the account is established and a call is placed, our network by dialing a local access or toll-free number. Our platform recognizes the user’scustomer’s phone through its network-provided automatic number identification (ANI) and seamlessly links each call to the corresponding BossBOSS Revolution account. Callers then enter their destination phone numbers. The dialing process is automated to provide one-touch dialing in the BossBOSS Revolution Calling app.

Boss Revolution customers’ account balances are typically debited at a fixed rate per minute.minute or at a fixed amount for calling plans to a specific country over a specified time period. In contrast to manycertain of our competitors, BossBOSS Revolution Calling does not charge connection, usage or breakage fees. BossBOSS Revolution Calling’s per minute rates can vary by the destination country, city, and whether the call is placed to a landline or mobile phone. Rates are published on the BossBOSS Revolution consumer website and within the BossBOSS Revolution Calling app. In addition to per minute prepaid plans, Boss Revolution offers unlimited calling plans for a flat monthly fee to some destinations.

Customers can add to, or top-up, their account balance at any Boss Revolution retailer using cash, a debit card or a credit card. Customers with a credit card, debit card or store-bought top-up voucher can also add to their account balance directly by phone, online throughUsers of the Boss Revolution consumer web site (www.bossrevolution.com), or through the BossBOSS Revolution Calling or Money apps.app constitute the majority of our customers to date. At July 31, 2023, approximately 1.5 million customers per month utilized the BOSS Revolution Calling app.

In the United States, we distribute many of our BOSS Revolution Calling hard cards and other retail products primarily through our network of distributors that, either directly or through sub-distributors, sellssell to retail locations. In addition, our internal sales force sells BossBOSS Revolution Calling and other platform products directly to retailers. Also,

At July 31, 2023, approximately 23,500 retailers per month utilized our digital retailer platform to provision customers, the Bosssubstantial majority of whom pay the retailer in cash. In addition, we estimate that approximately 5,000 retailers resell our disposable hard cards without utilizing our retailer portal. BOSS Revolution Calling app is available for download through both the iTunes and Google Play stores. Distributors, our internal sales people and retailers are typically receive commissions based on the revenue generated by each transaction.independent retailers serving foreign-born communities with significant unbanked or under-banked populations.

In 2017, we introduced a BossThe BOSS Revolution retailer portal that can be accessed viaby any broadband enabled device. Through the web browser on a mobile device to enable any qualified individual in the United States with an Android or iOS smartphone to become a Boss Revolution retailer and to manage their Boss Revolution account virtually anywhere, anytime. The Boss Revolution retailer portal, enables retailers can access our platform to create accounts for new customers, add funds to existing customer balances and execute sales transactions for the various products and services available on the portal.transactions. The Boss Revolution retailer portal alsoplatform provides us with a direct, real-time interface with our BOSS Revolution retailers resulting into create a cost-effective and adaptable distribution model that can rapidly respond to changes in the business environment.

The Boss Revolution platform allows us to target and promote services directly to distributors retailers and customers andretailers, to introduce and cross-sell offerings. In 2017, we introducednew offerings, and to rapidly adapt to changes in the BOSS Revolution Money app, which works seamlessly with the Boss Revolution Calling app to let customers send money transfers, mobile airtime top-up and electronic gift cards to family and friends easily and securely.business environment.

In the United States, the BossBOSS Revolution brand is supported by national, regional, and local marketing programs that include television and radio advertising, online advertising print media, and grass roots marketing at community and sporting events. In addition, we work closely with distributors and retailers on in-store promotional programs and events.

Retail Communications’BOSS Revolution Calling’s retail sales have traditionally been, and continue to be, strongest in the Northeastern United States and in Florida because of our extensive local distribution network and their large foreign-born populations.network. We continue to grow BOSS Revolution Calling’s distributor relationships and expand ourBOSS Revolution Calling’s retail network in other areas of the United States and Canada, including the Southwest and West Coast, whereCoast.

Competition

BOSS Revolution Calling is subject to fierce competition. While virtually any company offering communication services is a competitor, we historicallyface particularly strong competition from Tier 1 mobile network operators who offer flat-rate international calling plans, other PIN-less prepaid voice offerings, prepaid calling card providers, mobile virtual network operators, and VoIP and other “over the top”, or OTT, service providers. Outside the United States, we also compete with large state-owned or state-sanctioned telephone companies.

Many of these companies, including AT&T, Verizon, and T-Mobile, are substantially larger and have not hadgreater financial, technical, engineering, personnel, and marketing resources, longer operating histories, greater name recognition, and larger customer bases than we do.

In addition to these larger competitors, we face significant competition from smaller prepaid calling providers.

From time to time, competitors may offer rates that are substantially below ours, in an apparent attempt to gain market share. In some instances, these rates are below what we believe to be the cost to provide the service. This predatory pricing can adversely affect our revenues and our gross margins.

The continued growth of OTT calling and messaging services such as strongWhatsApp, Messenger, FaceTime, and others have adversely affected the sales of a market presence.

BOSS Revolution Calling and our other prepaid calling services. We expect the popularity of these IP-based services—many of which offer free voice and/or video communications—to launch Bosscontinue to increase, which will increase substitution for, and pricing pressure on, our BOSS Revolution Mobile beforeCalling and other international prepaid calling offerings. However, free services typically require both the endcaller and recipient to have a broadband connection. BOSS Revolution Calling utilizes telephone networks to enable voice communications even when neither party has broadband connectivity.

Many mobile operators offer unlimited international long-distance plans that include international destinations to which customers can place direct calls from their mobile phones without time limitation. These plans now include some of calendar 2017. Bossour most popular international destinations. The growth of these “international unlimited” plans adversely affects our revenues as these operators gain subscriber market share.

Our ability to compete successfully against these various operators and service providers stems from several factors, including:

Our ability to maintain and/or to capture additional market share will remain dependent upon our ability to continue to provide competitively priced services, to maintain our distribution and retail networks, to increase usage through the BOSS Revolution Mobile will be a domestic mobile service operating on Sprint’s nationwide network offering an innovative, low-cost model for mobile service underCalling app, and to innovate new products and services to fit the evolving needs of our Boss Revolution brand.customers.

Wholesale Carrier ServicesIDT Global

Wholesale Carrier Services’ revenue was $608.6

IDT Global’s revenues were $230.3 million in fiscal 20172023 compared to $567.4$292.4 million in fiscal 2016 (41.6%2022, contributing 23.0% and 39.1%24.6% of Telecom Platform Services’ revenueTraditional Communications’ revenues in fiscal 20172023 and fiscal 2016, respectively).2022, respectively.

Wholesale Carrier Services terminatesIDT Global is one of the largest wholesale carriers of international long-distance minutes in the world.

IDT Global’s telecommunications network is comprised of interconnections and commercial relationships that reach virtually every significant global telecom operator. These relationships enable us to carry international telecommunications traffic into more than 170200 countries around the world. The division’sIDT Global’s customers include our Retail Communications business,BOSS Revolution Calling and net2phone businesses, major and niche carriers around the globe, mobile network operators, and other service providers such as call aggregators. For many of these customers, particularly the major carriers, we engage in buy-sell relationships, terminating their customers’ traffic in exchange for terminating our wholesale and retail traffic with them.

We offerIDT Global offers competitively priced international termination rates at several quality levels. We can offer competitively priced termination services in part because of the large volumes of originating minutes generated by our Retail CommunicationsBOSS Revolution Calling business, our global platform powered by proprietary software, our team of professional and experienced account managers and market makers, and an extensiveour global network of interconnects aroundinterconnections and relationships with other telecom operators. IDT Global’s services are marketed and sold through our internal account management team and the globe.IDT Express digital portal. IDT Express focuses on delivering wholesale voice and direct inward dialing, or DID, services to small and medium size businesses domestically and internationally.

IDT TelecomTraditional Communications terminated 26.69.3 billion minutes in fiscal 2017,2023, as compared to 27.411.3 billion minutes in fiscal 2016, making us one of the largest carriers of international long-distance minutes worldwide. Wholesale Carrier Services2022. IDT Global accounted for 19.96.3 billion minutes and 19.37.7 billion minutes of the total IDT TelecomTraditional Communications’ minutes in fiscal 20172023 and fiscal 2016,2022, respectively.

IDT TelecomGlobal has a significant number of direct connections to Tier 1 providers outside the United States, particularly Tier 1 providers in North America, Latin America, Asia, Africa, Europe, and the Middle East. Tier 1 providers are the largest recognized licensed carriers in athe country. Direct connections improve the quality of the telephone calls and reduce the cost, thereby enabling us to generate more traffic with higher margins to the associated foreign locales. We also have direct relationships with mobile network operators, reflecting their growing share of the voice traffic market.

Termination rates charged by Tier 1 and other providers of international long-distance traffic have been declining for many years. Nevertheless, termination rates charged to us by individual Tier 1 carriers and mobile operators can be volatile. Termination price volatility on heavily trafficked routes can significantly impact our minutes of use and wholesale revenues.

In addition to offering competitive rates to our carrier customers, we emphasize our ability to offer the high-quality connections that these providers often require. To that end, we offer higher-priced services in which we provide higher-quality connections, based upon a set of predetermined quality of service criteria. These services meet a growing need for higher-quality connections for some of our customers who provide services to high-value, quality-conscious retail customers. As of July 31, 2017, Wholesale Carrier Services2023, IDT Global had more than 3,000 customers. IDT Telecom has over 6001,600 customers, including more than 315 carrier relationships globally.

Wholesale Carrier Services’ revenue isIDT Global’s revenues are generated by sales to both postpaid and prepaid customers. Postpaid customers typically include Tier 1 carriers, mobile network operators, and our most credit worthycreditworthy customers. The majority of IDT Global’s prepaid customers connect via our IDT Express portal. IDT Express offers the convenience of a mobile self-service portal paired with dedicated account managers backed by customer support. Prepaid customers are typically smaller telecommunication companies as well as independent call aggregators.

In fiscal 2017, we announced an

IDT Global also offers outsourcing initiative, Voicehub,services to help fixed and mobile telephony operators enhance the profitability and value of their international voice operations. Wholesale Carrier Services will provideIDT Global offers these operators with customized solutions, including full outsourcing, handing all inbound and outbound calls with or without switch management, and hybrid arrangements whereby the operator retains certain routes or customers directly.

Payment Services

Payment Services’ revenue was $245.3 million in fiscal 2017 compared Pursuant to $219.3 million in fiscal 2016 (16.7% and 15.1% of Telecom Platform Services’ revenue in fiscal 2017 and fiscal 2016, respectively).

Most of Payment Services’ revenue is generated bythese deals, IDT Global collaborates with the saleoperators to provide a full range of international airtime top-up offerings. Other products andlong-distance services in this vertical include domestic airtime top-up, gift cards sold in the United States and Europe, domestic bill pay service, our international money transfer service, our merchant services through POS terminals offerings and, until its expected sale in the fourth quarter of calendar 2017, the operations of our Gibraltar-based bank. Payment Services’ offerings leverage our platform capabilities, our distribution reach into foreign-born communities and our global reach to provide convenient and affordable offerings primarily over the Boss Revolution platform.

Our international airtime top-up products enable customers to purchase airtime for a prepaid mobile telephone in another country. They are sold both over our Boss Revolution platform and in hard card format. Our international airtime top-up offerings are focused on geographic corridors, such as the United States to various Central American countries, that tend to generate high volumes of business, and are part of a comprehensive product offering that includes product, marketing and distribution focused on those corridors.

International remittances are a significant economic activity among our target market of foreign-born residents and other under-banked communities. Our international money transfer service is offered over the Boss Revolution platform, and like other payment services, utilizes our retail network and associated ability to serve unbanked customers. However, we expect that only a limited number of Boss Revolution retailers in the United States will eventually qualify to process international money transfer transactions.

Revenues from international money transfer are derived from a per-transaction fee charged to the customer and from foreign exchange differentials. Transaction costs include commissions paid to the retail agent, payment to the international disbursing agent, banking, compliance, and foreign currency exchange costs.

Our merchant services business, National Retail Solutions, was founded in fiscal 2016 to help bodegas and other independent retailers serving immigrant communities compete more effectively against big-box retailers and retail chains.  NRS’s services leverage its nationwide network of point-of-sale (POS) terminals installed with bodegas nationwide.  NRS designed the POS terminals which offer versatile functionality including barcode scanners, customer and retailer facing hi-definition screens, and credit card readers.  At September 30, 2017, NRS had deployed over 3,500 POS terminals.

NRS derives revenue from the sale of the POS terminals to retailers, a monthly recurring fee for use of the terminals, and additional terminal-based marketing, advertising and payment services sold a la carte. These include data analytics, vendor payouts, inventory control, credit card processing and display advertising.  

NRS also aggregates the market power of its retailer network to provide compelling offerings for consumer-packaged goods (CPG) manufacturers and distributors who otherwise do not have an efficient channel to access independent, urban and immigrant-focused retailers.  NRS offers CPG suppliers access to its retailer network and to their respective customers through its popular customer loyalty program, the BR Club.  NRS’s offerings to CPG companies include coupon distributionin-country and redemption capabilities and new product placement and promotion.   overseas.

The NRS merchant services business is synergistic with other BOSS Revolution communications and payment services including PIN-less calling, international and domestic money transfer, and sales of international mobile top-up products.  BR Club members receive promotional text and in-store promotions for IDT’s calling and payment services offerings, all of which can be sold and provisioned by retailers directly from their NRS terminals.

Payment Services also includes reloadable prepaid debit cards marketed across the European Economic Area and Bank Identification Number (BIN) sponsorship services offered by our Gibraltar-based bank, which we expect to sell in the fourth quarter of calendar 2017.

International Operations

Internationally, we are a provider of prepaid calling cards including both private label and IDT-branded calling cards, which are sold through an extensive network of thousands of independent retailers as well as through our own internal sales force. Additionally, we sell Boss Revolution PIN-less international calling and domestic and international airtime top-up and payment services in select global markets both through retailers and directly to consumers. Wholesale Termination and related wholesale services are marketed and sold globally through our internal Carrier Sales team.

In Europe, we market our Retail Communications products in the United Kingdom, the Netherlands, Spain, Germany, Belgium, Italy, Luxembourg, Sweden, Switzerland, Denmark, Norway and Austria, seeking to capitalize on the demographic opportunity presented by immigration from outside of Europe to these developed nations. Because the immigrant market is fragmented, and due to the large number of markets in which we compete, we offer over 470 different prepaid calling cards in Europe. In addition, we sell Boss Revolution platform products through retailers, our mobile Calling app, and direct-to-consumer web sites in Germany, Spain and the United Kingdom. In the United Kingdom, we sell the Prime Card, a leading prepaid MasterCard through select retailers and online directly to consumers.

Our operations in Europe also include Wholesale Carrier Services. We maintain our European corporate, Retail Communications and Wholesale Carrier Services operations in London, England. We also operate satellite offices in Germany, Belgium, Spain, Italy, Ireland and Greece.

Our European operations, including Wholesale Carrier Services and Retail Communications, generated $408.9 million of revenues in fiscal 2017, an 11% increase from the $368.5 million of revenues generated during fiscal 2016. Our European operations’ revenues constituted 27.3% of IDT Telecom’s revenues in fiscal 2017, as compared to 24.8% in fiscal 2016.

In Asia, we sell Retail Communications products in Hong Kong, Singapore, Australia, Taiwan and Malaysia. In Hong Kong, we are one of the top providers of prepaid calling services to the Filipino, Indian and Indonesian populations, three of the largest overseas worker segments there. In addition, in Singapore, our Retail Communications products are a market leader to the Indian, Indonesian and Bangladeshi populations, which are among the largest ethnic segments in Singapore. We sell Boss Revolution platform products through retailers, our mobile Calling app, and direct-to-consumer web sites in Australia, Hong Kong, and Singapore. In Asia, we also sell postpaid services direct to consumers and small businesses. In fiscal 2017, IDT Telecom generated $43.7 million in revenues from our operations in the Asia Pacific region compared to $45.4 million in fiscal 2016. Our operations in Asia also include Wholesale Carrier Services. We maintain our Asia Pacific headquarters in Hong Kong.

In Latin America, we market Retail Communications products in Argentina and Brazil. In addition, we offer SIP Trunking VoIP services in Brazil to large enterprise businesses. In fiscal 2017, net2phone began offering its Hosted PBX services in Brazil and Argentina. We maintain our Latin American headquarters in Buenos Aires, Argentina and Sao Paulo, Brazil. In fiscal 2017, IDT Telecom generated $10.4 million in revenues from the sale of Retail Communications and UCaaS products in Latin America compared to $13.3 million in fiscal 2016.

Sales, Marketing and Distribution

In the United States, we distribute Retail Communications and Payment Services products, including Boss Revolution PIN-less, domestic and international airtime top-up offerings, and prepaid calling cards primarily to retail outlets through our network of distributors or through our internal sales force. In addition, our private label calling cards as well as our IDT-branded calling cards are also marketed to retail chains and outlets through our internal sales force, and from time to time, we may utilize third-party agents or brokers to acquire accounts. We also market prepaid offerings, including Boss Revolution PIN-less and domestic and international airtime top-up, direct to the consumer via online channels including the Boss Revolution consumer website (www.bossrevolution.com) and mobile apps for iOS and Android.

net2phone, our VoIP division, focuses on the Agent channel marketplace by partnering with service providers, distributors, system integrators, telecom agents and master agents domestically and internationally. These partners utilize net2phone’s full suite of VoIP communication solutions focusing on net2phone’s SIP Trunking and Hosted PBX solutions. net2phone’s Cable Telephony unit white labels net2phone’s residential, broadband telephony solution to complete the cable operator’s triple play. net2phone white labels its Hosted PBX solution for the operator’s business customers as well, allowing their enterprise and residential end users to capitalize on the growth, flexibility and cost advantages of IP-based calling.

In Europe, Asia Pacific and Latin America, we are a leading provider of prepaid calling cards including both private label and IDT-branded calling cards, which are sold through an extensive network of thousands of independent retailers as well as through our own internal sales force. Additionally, we sell Boss Revolution PIN-less international calling and domestic and international airtime top-up in select markets both through retailers and directly to consumers. In Asia, we also sell postpaid services direct to consumers and small businesses. In the United Kingdom, we sell the Prime Card, a leading prepaid MasterCard through select retailers and online directly to consumers. Wholesale Carrier Services are marketed and sold through our internal Carrier Sales team. In Canada, we sell Boss Revolution platform products through retailers, our mobile Calling app, and direct-to-consumer web sites.

Telecommunications Network Infrastructure

IDT Telecom operates a global network to provide an array of telecommunications and payment services to our customers worldwide using a combination of proprietary and third-party applications. Proprietary applications include call routing and rating, customer provisioning, call management, e-commerce sites, product web pages, calling card features, and payment services features. Proprietary applications provide the flexibility to adapt to evolving marketplace demands without waiting for third-party software releases, and often provide advantages in capability or cost over commercially available alternatives.

The IDT Telecom core voice network utilizes VoIP and is interconnected, where needed, through gateways to time-division multiplexing, or TDM, networks worldwide. This hybrid IP/TDM capability allows IDT Telecom to interface with carriers using the lowest cost technology protocol available. To support its global reach, IDT Telecom operates voice switches and/or points of presence in the United States, Europe, South America, Asia and Australia. IDT Telecom receives and terminates voice traffic from every country in the world, including cellular, landline and satellite calls through direct and indirect interconnects. The network includes data centers located in the United States, the United Kingdom and Hong Kong, which house equipment used for both our voice and payment services, with smaller points of presence in several other countries. It is monitored and operated on a continual basis by our Network Operations Center in the United States. More recently, we started to make use of one of the leading cloud providers to serve as host for some of our application infrastructure.

UNIFIED COMMUNICATIONS AS A SERVICE (UCAAS)

UCaaS’ revenue was $29.4 million in fiscal 2017 compared to $26.4 million in fiscal 2016. UCaaS’ loss from operations was $1.9 million in fiscal 2017 compared to $1.6 million in fiscal 2016.

UCaaS’ revenue is generated primarily by VoIP products and services sold under the net2phone brand. net2phone’s VoiP offerings include (1) cable telephony, (2) cloud-based private branch exchange, or PBX, services offered to enterprise customers exclusively through value-added resellers (VARs), service providers, telecom agents and managed service providers, (3) Session Initiation Protocol, or SIP, trunking, which supports inbound and outbound domestic and international calling from an IP PBX, and (4) PicuP, a highly-automated business phone service that answers, routes and manages voice calls. In fiscal 2017, net2phone launched cloud-based PBX services in Brazil and Argentina, leveraging IDT’s local licenses, telephony platform and infrastructure. net2phone plans to expand into new markets in South America, Europe and Asia focusing on its cloud-based PBX product set.

IDT continues to optimize and improve its cable telephony platform to reduce the underlying costs of service and increase the speed of deployment.

Sales, Marketing and Distribution

net2phone focuses on the agent channel marketplace by partnering with service providers, distributors, system integrators, telecom agents and master agents domestically and internationally. These partners utilize net2phone’s full suite of VoIP communication solutions focusing on net2phone’s SIP Trunking and Hosted PBX solutions. net2phone’s Cable Telephony unit white labels net2phone’s residential, broadband telephony solution to complete the cable operator’s triple play. net2phone also white labels its Hosted PBX solution for the operator’s business customers, allowing their enterprise end users to capitalize on the growth, flexibility and cost advantages of IP-based calling.

CONSUMER PHONE SERVICES

Our Consumer Phone Services segment generated revenues of $5.5 million and income from operations of $1.1 million in fiscal 2017, as compared to revenues of $6.9 million and income from operations of $1.2 million in fiscal 2016.

During fiscal 2017, we continued to operate the business in harvest mode-maximizing revenue from current customers while maintaining expenses at the minimum levels essential to operate the business. This strategy has been in effect since calendar 2005 when the Federal Communications Commission, or FCC, decided to terminate the UNE-P pricing regime, which resulted in significantly inferior economics in the operating model for this business. We expect the Consumer Phone Services’ customer base and revenues will continue to decline in fiscal 2018.

We currently provide our bundled local/long distance phone service in 11 states, marketed under the brand name IDT America. Our bundled local/long distance service, offered predominantly to residential customers, includes unlimited local, regional toll and domestic long distance calling and popular calling features. A second plan is available, providing unlimited local service with our long distance included for as low as 3.9 cents per minute. With either plan, competitive international rates and/or additional features can be added for additional monthly fees. We also offer stand-alone long-distance service throughout the United States.

At July 31, 2017, we had approximately 3,500 active customers for our bundled local/long distance plans and approximately 14,500 customers for our long distance-only plans, compared to approximately 4,200 and 18,100 customers, respectively, on July 31, 2016. Our highest customer concentrations are in large urban areas, with the greatest number of customers located in New York, New Jersey, Pennsylvania and Massachusetts.

ALL OTHER

Operating segments that are not reportable individually are included in All Other. During fiscal 2017, All Other generated $2.7 million in revenues and income from operations of $0.3 million, compared to revenues of $11.5 million and income from operations of $4.2 million during fiscal 2016.

All Other also includes our real estate holdings, and other smaller businesses.

We own the approximate 496,000 square-foot building in Newark, New Jersey in which our headquarters is located, and we occupy approximately 20% of that building. We also own an 800-car public parking garage located across the street from that building. In addition, we own a building in Piscataway, New Jersey that is used partially by IDT Telecom for certain of its operations and a 12,400 square foot condominium interest in a building in Jerusalem, Israel.

In fiscal 2016 and 2017, we made investments totaling $10 million in Rafael Pharmaceuticals, a clinical stage, oncology-focused pharmaceutical company committed to the development and commercialization of therapies that exploit the metabolic differences between normal cells and cancer cells. Our 90%-owned subsidiary, IDT-Rafael Holdings, LLC, or IDT-Rafael Holdings, owns direct and indirect interests in Rafael Pharmaceuticals. IDT-Rafael Holdings owns a 50% interest in CS Pharma Holdings, LLC, or CS Pharma.  CS Pharma owns $10 million in Convertible Series D Notes issued by Rafael Pharmaceuticals. We and CS Pharma hold warrants to purchase up to 56%, in the aggregate, of the then issued and outstanding capital stock of Rafael Pharmaceuticals, on an as-converted and fully diluted basis.

The Rafael Pharmaceuticals Series D Note earns interest at 3.5% per annum, with principal and accrued interest due and payable on September 16, 2018. The Series D Note is convertible at the holder’s option into shares of Rafael Pharmaceuticals Series D Preferred Stock at a price of $1.25 per share, subject to downward adjustment if there are interim financings of Rafael Pharmaceuticals at lower prices and certain other events. The Series D Note also includes a mandatory conversion into Rafael Pharmaceuticals common stock upon a qualified initial public offering of Rafael Pharmaceuticals.

The right to exercise Rafael Pharmaceuticals warrants as to the first $10 million thereof is held by CS Pharma. The exercise price of the warrant is the lower of 70% of the price sold in an equity financing of Rafael Pharmaceuticals, or $1.25 per share, subject to certain adjustments. The warrant will expire upon the earlier of December 31, 2020 or a qualified initial public offering of Rafael Pharmaceuticals or liquidation event of Rafael Pharmaceuticals. 

The 50% of CS Pharma not held by IDT-Rafael Holdings are held by investors who purchased that interest for $10 million in the aggregate. CS Pharma holds $10 million of cash that is expected to be invested in Rafael Pharmaceuticals.  The 10% of IDT-Rafael Holdings that we do not own is owned by Howard S. Jonas.

In addition, IDT-Rafael Holdings had the contractual right to receive additional shares of Rafael Pharmaceuticals representing 10% of the outstanding capital stock of Rafael Pharmaceuticals that will be issued upon the occurrence of any of the following: (i) Food and Drug Administration approval of a Rafael Pharmaceuticals drug application, (ii) an initial public offering of Rafael Pharmaceuticals at a valuation of over $500 million, or (iii) a sale of Rafael Pharmaceuticals above certain valuations. Currently, none of the conditions have been satisfied and the right remains contingent. On September 14, 2017, IDT-Rafael Holdings distributed this right to its members on a pro-rata basis such that we received the right to 9% of the outstanding capital stock of Rafael Pharmaceuticals and Mr. Jonas received the right to 1% of the outstanding capital stock of Rafael Pharmaceuticals. In addition, as compensation for assuming the role of Chairman of the Board of Rafael Pharmaceuticals, and to create additional incentive to contribute to the success of Rafael Pharmaceuticals, on September 19, 2017, we transferred our right to receive 9% of the outstanding capital stock of Rafael Pharmaceuticals to Mr. Jonas. The right is further transferable at the discretion of Mr. Jonas.

In fiscal 2017 and fiscal 2016, we used cash of $1.4 million and $0.1 million, respectively, for investments in Lipomedix Pharmaceuticals Ltd., a development-stage, privately held Israeli company focused on the development of an innovative, safe and effective cancer therapy based on liposome delivery. We own 38.9% of the issued and outstanding ordinary shares of Lipomedix. We have the option to invest an additional $0.9 million in Lipomedix, which would increase our aggregate ownership to 50.6% of the issued share capital on a fully diluted basis. The option expires on the earlier of (1) a merger or acquisition transaction, (2) an initial public offering, or (3) November 30, 2017.

Throughout fiscal 2017, we prepared to spin off non-core assets including our interests in Rafael Pharmaceuticals and Lipomedix as well as our real estate holdings to our shareholders as Rafael Holdings, Inc. In addition, we intend to contribute $50 million to $60 million in cash to Rafael Holdings, Inc. prior to the spin-off.

On June 1, 2016, we completed the Zedge Spin-Off, which was a pro rata distribution of the common stock that we held in our subsidiary Zedge to our stockholders. At the time of its spin-off, Zedge’s principal business consisted of providing one of the most popular content platforms for mobile device personalization including ringtones, wallpapers, home screen icons and notification sounds. Prior to its sale in October 2014, Fabrix was also included in All Other. Fabrix is a software development company offering a cloud-based scale-out storage and computing platform optimized for big data, virtualization and media storage, processing and delivery. The final sale price for 100% of the shares in Fabrix was $95 million in cash, excluding transaction costs and working capital and other adjustments. We owned approximately 78% of Fabrix on a fully diluted basis. Our share of the sale price was $69.2 million, after reflecting the impact of working capital and other adjustments. We recorded gain on the sale of our interest in Fabrix of $76.9 million and $1.1 million in fiscal 2015 and fiscal 2016, respectively.

COMPETITION

IDT Telecom

Telecom Platform Services

Retail Communications

Like all international calling services, our Boss Revolution PIN-less serviceGlobal is subject to fierce competition,intense revenue and we do not expectmargin pressure as communications globally continues to continuetransition away from international voice calling to grow revenuesvideo conferencing and margins without a successful strategyother collaboration platforms, low-cost or free messaging services, free peer-to-peer voice calls available when both parties utilize broadband connections, and sound execution. While virtually any company offering communication services is a competitor of our Retail Communications offerings, we face particularly strong competition from Tier 1flat-rate international long-distance plans offered both by the largest mobile network operators who offer flat rate international calling plans, other PIN-less prepaid voice offerings, prepaid calling card providers,and niche mobile virtual network operators (or MVNOs) with aggressive international rate plans, and VoIP and other “over the top” (OTT) service providers. Outside the United States, we also compete with large foreign state-owned or state sanctioned telephone companies.operators.

In our view, our ability to compete successfully against these operators depends on several factors. Our interconnect and termination agreements, network infrastructure and least-cost-routing system enable us to offer low-cost, high quality services. Our extensive distribution and retail networks provide us with a strong presence in communities of foreign-born residents, a significant portion of which purchase our services with cash. Our Boss Revolution brand is often highly visible in these communities and has a reputation for quality service and competitive, transparent pricing. Finally, we also offer synergistic payment services over the Boss Revolution platform that customers can conveniently access from their accounts. In our view, these factors represent competitive advantages.Competition

However, some of our competitors have significantly greater financial resources and name recognition, and can provide comparable service levels and pricing through established brands. Consequently, our ability to maintain and/or to capture additional market share will remain dependent upon our ability to continue to provide competitively priced services, expand our distribution and retail networks, improve our ability to reach and sell to customers through mobile devices, develop successful new products and services to fit the evolving needs of our customers, and continue to build the brand equity of Boss Revolution.

Wholesale Carrier Services

The wholesale carrier industry has numerous entities competing for the same customers, primarily based on price products and quality of service.

In our Wholesale Carrier Services business, we participateIDT Global participates in a global market placemarketplace with:

Our Wholesale Carrier Services businessWe believe that IDT Global derives a competitive advantage from several inter-related factors: our Retail Communications business generates large volumes of originating minutes, which represents a desirable, tradable asset that helps us win return traffic and obtain beneficial pricing which we can offer in the wholesale arena; the proprietary technologies powering our wholesale platform and in particular, the software that drives voice over internet protocols enables us to scale up at a lower cost than many of our competitors; our professional and experienced account management; and our extensive network of interconnects around the globe, with the ability to connect in whichever format (IP or TDM) is most feasible. In aggregate, these factors provide us with a competitive advantage over some participants on certain routes.routes from several inter-related factors:

Payment Services

The major competitors to Payment Services’ offerings include:

Unified Communications asand Payment Network Infrastructure and Technology Development

Our products and services utilize a Service (UCaaS)

Somecombination of the major competitors to our UCaaS offerings include other UCaaSproprietary software and or hosted voice providers such as Vonage Business, Nextiva, 8x8, West Corp, and Ring Central. Due to their longevity and substantial investments in the space, these providers offer a more advanced product set that includes features such as video, chat, collaboration, and analytics. These competitors, in addition to possessing more widely recognized brands, also support integration of their services with other well-known, third-party customer relationship management, or CRM, vendors such as SalesForce and SugarCRM as well as with various Google applications.technologies and services provided by third parties. We have developed intuitive user interfaces, customer tools and transaction processing, and database and network applications that enable our users to reliably and securely complete transactions and help our customers and partners utilize our suite of services. Our technology infrastructure simplifies the storage and processing of large amounts of data, eases the deployment and operation of large-scale global products and services, and automates much of the administration of large-scale clusters of computers.

Consumer Phone Services

Our technology infrastructure has been designed around industry-standard architectures to reduce downtime in the event of outages or catastrophic occurrences. We strive to continually improve our technology infrastructure to enhance the customer experience and to increase efficiency, scalability, and security. Our platforms’ architecture enables us to connect parties regardless of whether the transaction is occurring at a traditional physical location, online, or through a mobile device. Our platforms incorporate multiple layers of protection, both for continuity purposes and to address cyber-security challenges. We engage in multiple efforts to protect our software platforms against these challenges, including regularly testing our systems to address potential vulnerabilities.

Our technology organization is responsible for the design, development, testing, and delivery of new software, technologies, and features of our products and services, as well as the continued improvement and iteration of our existing products and services. Our technology employees are remotely distributed globally and, in our Newark, Jerusalem, Guatemala, Warsaw, and Minsk offices. Our technology team consist of our software engineering, voice engineering, quality engineering, data warehousing, ML (Machine Learning) and AI (Artificial Intelligence) development, data engineering, systems, NOC (Network Operations Center), and operations teams. We intend to continue to invest in our research and development capabilities to extend our products and services.

Our technology organization uses several key performance indicators to track service quality that meet or exceed industry standards for SaaS (Software-as-a-Service) and technology enabled services. As of July 31, 2023, our technology organization maintained an aggregate service uptime of approximately 99.97% in fiscal 2023. The U.S. consumer phone services industrysoftware defect escape ratio, a measure of quality engineering for our flagship BOSS Revolution brand, was 4% in fiscal 2023, meaning more than 96% of product defects were detected and fixed internally before being released to our customers. Furthermore, this high level of quality was achieved utilizing suites of proprietary tests of which over 90% are fully automated by a combination of proprietary software and technologies provided by third parties.

Our product offerings and go-to-market strategy continue to evolve, and we expect our product offerings to continue to become available to customers at more frequent intervals than our historical release cycles. Our Agile development methodology is characterized by intense competition,a dynamic development process with numerous providers competing for a declining number of wireline customers, leadingmore frequent revisions to a high churn rate because customers frequently change providers in response to offersproduct release’s features and functions as the software is being developed. In addition, we have implemented a holistic portfolio management process, which has improved transparency and efficiency across the portfolio through a recurring cadence of lower rates or promotional incentives.business reviews.

The regional bell operating companies, or RBOCs, remain our primary competitors in the local exchange market. We are also competing with providers offering communications service over broadband connections using VoIP technology, such as cable companies and independent VoIP providers. Companies also provide voice telephony services over broadband Internet connections, allowing users of these Internet services, such as Vonage and Skype, to obtain communications services without subscribing to a conventional telephone line. Mobile wireless companies are deploying wireless technology as a substitute for traditional wireline local telephones.REGULATION

Due to changes in the U.S. regulatory environment that affected our cost of provisioning bundled local/long distance phone services and increased competition, we ceased marketing activities for this service, and as a result, our Consumer Phone Services business has declined significantly.

REGULATION

The following summary of regulatory developments and legislation is intended to describe what we believe to be the most important, but not all, current and proposed international, federal, state, and local laws, regulations, orders, and legislation that are likely to materially affect us.

Regulation of Telecom in the United States

Telecommunications services are subject to extensive government regulation at both the federal and state levels in the United States. Any violations of the regulations may subject us to enforcement actions, including interest and penalties. The Federal Communications Commission, or FCC, has jurisdiction over all telecommunicationstelecommunication’s common carriers to the extent they provide interstate or international communications services, including the use of local networks to originate or terminate such services. Each state regulatory commission has jurisdiction over the same carriers with respect to their provision of local and intrastate communications services. Local governments often indirectly regulate aspects of our communications business by imposing zoning requirements, taxes, permit or right-of-way procedures or franchise fees. Significant changes to the applicable laws or regulations imposed by any of these regulators could have a material adverse effect on our business, operating results and financial condition.

Regulation of Telecom by the Federal Communications Commission

Universal Service and Other Regulatory Fees and Charges

In 1997, the FCC issued an order, referred to as the Universal Service Order, that requires all telecommunications carriers providing interstate telecommunications services to contribute to universal service support programs administered by the FCC (known as the Universal Service Fund). In addition, beginning in October 2006, interconnected VoIP providers, such as our subsidiary net2phone, are required to contribute to the Universal Service Fund. These periodic contributions are currently assessed based on a percentage of each contributor’s interstate and international end user telecommunications revenues reported to the FCC. We also contribute to several other regulatory funds and programs, most notably Telecommunications Relay Service, FCC Regulatory Fees, and Local Number Portability (collectively, the Other Funds). We and most of our competitors pass through Universal Service Fund and Other Funds contributions as part of the price of our services, either as part of the base rate or, to the extent allowed, as a separate surcharge on customer bills. Due to the manner in which these contributions are calculated, we cannot be assured that we fully recover from our customers all of our contributions. In addition, based on the nature of our current business, we receive certain exemptions from federal Universal Service Fund contributions. Changes in our business could eliminate our ability to qualify for some or all of these exemptions. As a result, our ability to pursue certain new business opportunities in the future may be constrained in order to maintain these exemptions, the elimination of which could materially affect the rates we would need to charge for existing services. Changes in regulation may also have an impact on the availability of some or all of these exemptions. If even some of these exemptions become unavailable, they could materially increase our federal Universal Service Fund or Other Funds’ contributions and have a material adverse effect on the cost of our operations and, therefore, on our ability to continue to operate profitably, and to develop and grow our business. We cannot be certain of the stability of the contribution factors for the Other Funds. Significant increases in the contribution factor for the Other Funds in general and the Telecommunications Relay Service Fund in particular can impact our profitability. Whether these contribution factors will be stable in the future is unknown, but it is possible that we will be subject to significant increases.

Interconnection and Unbundled Network Elements

FCC rule changes relating to unbundling have resulted in increased costs to purchase services and increased uncertainty regarding the financial viability of providing service using unbundled network elements. As a result, starting in 2006, we placed our Consumer Phone Services business in “harvest mode,” wherein we seek to retain existing customers but do not actively market to new customers.

We continue to negotiate interconnection arrangements with Incumbent Local Exchange Carriers, or ILECs, generally on a state-by-state basis, for our Consumer Phone Services business as well as other businesses. These agreements typically have terms of two or three years and need to be periodically renewed and renegotiated. While current FCC rules and regulations require the incumbent provider to provide certain network elements necessary for us to provision end-user services on an individual and combined basis, we cannot assure that the ILECs will provide these components in a manner and at a price that will support competitive operations.

Access Charges

As a provider of long distance services, we remit access fees directly to local exchange carriers or indirectly to our underlying long-distance carriers for the origination and termination of our long-distance telecommunications traffic. Generally, intrastate access charges are higher than interstate access charges. Therefore, to the degree access charges increase or a greater percentage of our long-distance traffic becomes intrastate, our costs of providing long distance services will increase. Similarly, as a local exchange provider, we bill access charges to long distance providers for the termination of those providers’ long-distance calls. Accordingly, as opposed to our long-distance business, our local exchange business benefits from the receipt of intrastate and interstate long distance traffic. Under FCC rules, our interstate access rates must be set at levels no higher than those of the ILEC in each area we serve, which limits our ability to seek increased revenue from these services. Some, but not all, states have similar restrictions on our intrastate access charges.

For nearly a decade, the FCC has had open regulatory proceedings in which it has considered reforming “intercarrier compensation,” which is a term that covers the payments that carriers bill and remit to each other-access charges and reciprocal compensation, generally-for the use of telecommunications networks to originate and terminate phone calls. On November 18, 2011, the FCC released a Report and Order and Further Notice of Proposed Rulemaking wherein it set forth a schedule which, over a period of several years, substantially reduces terminating access rates. Since we both make payments to and receive payments from other carriers for terminating long distance calls, the FCC’s action has the effect of reducing payments we receive from other carriers while also reducing our costs to terminate our long-distance calls. The FCC has also raised the possibility - which it has yet to conclusively act upon - that it will reduce originating access charges in a similar manner. Due to the nature of IDT’s business, IDT pays, but does not bill originating access charges. At this time we cannot predict the effect future FCC actions may have upon our business.

Customer Proprietary Network Information

In 2007, the FCC increased its regulatory oversight of Customer Proprietary Network Information, or CPNI. The FCC took this increased role in response to several high-profile cases of “pretexting,” which occurs when an individual secures from a communications provider, through deception, the private phone records of another person. We have a CPNI compliance policy in place and we believe we currently meet or exceed all FCC requirements for the protection of CPNI. However, we cannot be assured that we are in full compliance and if the FCC were to conclude that we were not in compliance, we could be subject to fines or other forms of sanction.

Straight Path Spectrum LLC

On September 20, 2016, we received a letter of inquiry from the Enforcement Bureau of the FCC requesting certain information and materials related to an investigation of potential violations by Straight Path Spectrum LLC (formerly a subsidiary of ours and currently a subsidiary of Straight Path) in connection with licenses to operate on the 28 GHz and 39 GHz bands of the Fixed Microwave Services. As disclosed in Straight Path’s filings with the SEC, Straight Path entered into a consent decree with the FCC that terminated the FCC’s related investigation against Straight Path. We have cooperated with the FCC in this matter and have responded to the letter of inquiry. If the FCC were to pursue separate action against us, the FCC could seek to fine or impose regulatory penalties or civil liability on us related to activities during the period of ownership by us.

Regulation of Telecom by State Public Utility Commissions

Our telecommunications services that originate and terminate within the same state, including both local and in-state long distance services are subject to the jurisdiction of that state’s public utility commission.commission, or PUC. The Communications Act of 1934, as amended, generally preempts state statutes and regulations that prevent the provision of competitive services but permits state public utility commissionsPUCs to regulate the rates, terms and conditions of intrastate services, so long as such regulation is not inconsistent with the requirements of federal law. We are certified to provide facilities-based and/or resold long-distance service in all 50 states and facilities-based and resold local exchange service in 45 states. In addition to requiring certification, state regulatory authorities may impose tariff and filing requirements, consumer protection measures, and obligations to contribute to universal servicethe Universal Service Fund and other funds.Other Funds. Rates for intrastate switched access services, which we both pay to local exchange companies and collect from long-distance companies for terminating in-state toll calls, are subject to the jurisdiction of the state commissions. State commissions also have jurisdiction to approve negotiated rates, or establish rates through arbitration, for interconnection, including rates for unbundled network elements. Changes in those access charges or rates for unbundled network elements could have a substantial and material impact on our business.

Regulation of Telecom—International

In connection with our international operations, we have obtained licenses or are otherwise authorized to provide telecommunications services in various foreign countries. We have obtained licenses or authorizations in Argentina, Australia, Belgium, Brazil, Canada, Chile, Denmark, Germany, Hong Kong, Italy, Japan, Mexico, the Netherlands, Peru, Singapore, South Africa, Spain, Sweden, Switzerland, the United Kingdom, and Uruguay. In numerous countries where we operate or plan to operate, we are subject to many local laws and regulations that, among other things, may restrict or limit the ability of telecommunications companies to provide telecommunications services in competition with state-owned or state-sanctioned dominant carriers.

Regulation of Internet Telephony

The use of the Internet and private IP networks to provide voice communications services is generally less regulated than traditional switch-based telephony within the United States and abroad and, in many markets, is not subject to the imposition of certain taxes and fees that increase our costs. As a result, IDT iswe are able, in many markets, to offer VoIP communications services at rates that are more attractive than those applicable to traditional telephone services. However, in the U.S. and abroad, there have been efforts by legislatures and regulators to harmonize the regulatory structures between traditional switch-based telephony and VoIP. This could result in additional fees, charges, taxes, and regulations on IP communications services that could materially increase our costs and may limit or eliminate our competitive pricing advantages. Additionally, several foreign governments have adopted laws and/or regulations that could restrict or prohibit the provision of voice communications services over the Internet or private IP networks. These efforts could likewise harm our ability to offer VoIP communications services.

Money Transmitter and Payment Instrument Laws and Regulations

Our consumer payment services offerings include money transferBOSS Money and various network branded, (alsoalso called “open loop”), prepaid card offerings. These industries are heavily regulated. Accordingly, we, and the products and services that we market in consumer payment services, are subject to a variety of federal and state laws and regulations, including:

In connection with the development of our money transmission services and the expansion of our network branded prepaid card offerings, we have actively pursued our own money transmitter licenses. At July 31, 2017,2023, we had received a money transmitter license in 4748 of the 49 U.S. states that require such a license, as well as in Puerto Rico and Washington, D.C.

Regulation of Other Businesses

We operate other smaller or early-stage initiatives and operations, which may be subject to federal, state, local or foreign law and regulation.

INTELLECTUAL PROPERTY

We rely on a combinationown numerous patents, trademarks, domain names and other intellectual property rights necessary to conduct our business. We actively pursue the filing and registration of patents, copyrights,domain names, trademarks, domain name registrations and trade secret laws in the United States and other jurisdictions and contractual restrictionsservice marks to protect our intellectual property rights and our brand names. All of our employees sign confidentiality agreements. These agreements provide that the employee may not use or disclose our confidential information except as expressly permitted in connection with the performance of his or her duties for us, or in other limited circumstances. These agreements also state that, to the extent rights in any invention conceived by the employee while employed by us do not vest in us automatically by operation of law, the employee is required to assign his or her rights to us.

We own approximately 100 trademark and service mark registrations and pending applications inwithin the United States and at least 360 registrationsabroad; in particular our registered trademarks and pending applications abroad. We protect our brands in the marketplace including the IDT, Boss Revolutionbrands: IDT®, BOSS Revolution®, and net2phone brands. Where deemed appropriate, we have filed trademark applications throughout the world in an effortnet2phone®. From time to protect our trademarks. Where deemed appropriate,time, we have also filed patent applicationsacquired or licensed intellectual property relating to present and future business strategy. We believe that our technological position significantly depends on the technical experience, expertise, and creative ability of our employees to maintain both our current businesses and pursue future business development. Our corporate policies require all employees to assign intellectual property rights developed in an effortthe scope of, or in relation to our business to us, and to protect our patentableall intellectual property. IDT Corporation owns 11 issued patentsproperty and 3 patent applications in the United Statesproprietary information and 14 patents issued abroad with 4 patent applications pending abroad.materials as confidential.

We maintain aOur global telecommunications switching and transmission infrastructure that enables us to provide an array of telecommunications, Internetinternet access and Internetinternet telephony services to our customers worldwide. We haverely upon domestic and foreign patents, and patent applications, and other intellectual property rights, regarding our infrastructure and/orand global telecommunication network for our international telecommunications traffic and the international traffic of other telecommunications companies.

CircumstancesEMPLOYEES AND HUMAN CAPITAL RESOURCES

Attracting and retaining qualified personnel familiar with our businesses who head our different businesses units is critical to our success. As of October 1, 2023, we had a total of approximately 1,890 employees, of which approximately 1,880 were full-time employees.

Our human capital resources objectives include, as applicable, identifying, recruiting, retaining, incentivizing, and integrating our existing and new employees, advisors and consultants. To accomplish that, our compensation practices are designed to attract and retain qualified and motivated personnel and align their interests with our goals and with the best interests of our stockholders. Our compensation philosophy is to provide compensation to attract the individuals necessary for our current needs and growth initiatives and provide them with the proper incentives to motivate those individuals to achieve our long-term plans, which includes among other things, equity and cash incentive plans that attract, retain and reward personnel through the granting of stock-based and cash-based compensation awards.

We believe that talent attraction and retention are critical to our ability to achieve our strategy and that a trained, diverse and inspired workforce is integral to delivering our objectives. Our recruiting process reaches a wide array of potential employees, and we employ a rigorous screening process to ensure that we identify and hire quality professionals.

We are committed to diversity and inclusion in the workforce including a policy of non-discriminatory treatment and respect of human rights for all current and prospective employees. We do not permit discrimination based on an individual’s race, religion, creed, color, sex, sexual orientation, age, marital status, disability, national origin or veteran’s status and is illegal in many jurisdictions. We respect the human rights of all employees and strive to treat them with dignity consistent with standards and practices recognized by the international community.

Item 1A. Risk Factors.

RISK FACTORS

Investing in our Class B common stock involves a high degree of risk. You should carefully consider the risks and uncertainties described below, together with all of the other information in this Annual Report on Form 10-K, including the section titled “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and our consolidated financial statements and related notes, before making a decision to invest in our Class B common stock. The risks and uncertainties described below may not be the only ones we face. If any of the risks occur, our business, financial condition, operating results, cash flows and prospects could be materially and adversely affected. In that event, the market price of our common stock could decline, and you could lose part or all of your investment.

Risk Factor Summary

Our business operations are subject to numerous risks and uncertainties, including those outside of our control, that could cause our business, financial condition or operating results to be harmed, including, but not limited to, risks regarding the following:

Risks Related to our Businesses and Operations

Risks Related to Our NRS Business

Risks Related to Our net2phone Business

Risks Related to Our Traditional Communications Segment

Risks Related to Our Financial Condition

Intellectual Property, Tax, Regulatory, and Litigation Risks (many of which are related to our Fintech segment, among others)

Risks Related to Our Capital Structure

Risks Related to Our Businesses and Operations

Errors in our technology or technological issues outside our control could pose a threatcause delays or interruptions to our intellectual property rights. For example, effective intellectual property protectioncustomers.

Our services can be disrupted by issues with our networks, platforms, technology, and systems, including malfunctions in our servers, processors, software or facilities. In addition, there may be service interruptions for reasons outside of our control. Our customers and potential customers subscribing to our services have experienced such interruptions in the past and may experience such interruptions in the future as a result of these types of problems or others which may or may not be available in every countryour control. Such interruptions may cause us to lose customers and/or offer customer credits, which could adversely affect our revenue and profitability. Network and telecommunication interruptions may also impair our ability to sign-up new customers.

Cyberattacks impacting our networks or systems could have an adverse effect on our business.

Cyberattacks, including through the use of malware, ransomware, computer viruses, denial of services attacks, credential harvesting, social engineering and other means for obtaining unauthorized access to or disrupting the operation of our networks and systems and those of our suppliers, vendors and other service providers, could have an adverse effect on our business. Cyberattacks may cause equipment failures, loss of information, including sensitive personal information of customers or employees or valuable technical and marketing information, as well as disruptions to our or our customers’ operations. Furthermore, ransomware could potentially deny the use of our systems until a ransom is paid. Cyberattacks against companies, including us, have increased in which our productsfrequency, scope, and services are distributed. Also,potential harm in recent years. They may occur alone or in conjunction with physical attacks, especially where disruption of service is an objective of the effortsattacker. The development and maintenance of systems to prevent such attacks is costly and requires ongoing monitoring and updating to address their increasing prevalence and sophistication. While, to date, we have takennot been subject to cyberattacks that, individually or in the aggregate, have been material to our operations or financial condition, the preventive actions we take to reduce the risks associated with cyberattacks, including protection of our systems and networks, may be insufficient to repel or mitigate the effects of a cyberattack in the future.

The inability to operate or use our networks and systems or those of our suppliers, vendors, and other service providers as a result of cyberattacks, even for a limited period of time, may result in significant expenses to us and/or a loss of market share. The costs associated with a major cyberattack on us could include expensive incentives offered to existing customers and business partners to retain their business, increased expenditures on cybersecurity measures and the use of alternate resources, lost revenues from business interruption, and litigation. Further, certain of our businesses, such as those offering cloud services to business customers, could be negatively affected if our ability to protect our own networks and systems is called into question because of a cyberattack. In addition, a compromise of security or a theft or other compromise of valuable information, such as financial data and sensitive or private personal information, could result in lawsuits and government claims, investigations, or proceedings. Any of these occurrences could damage our reputation, adversely impact customer and investor confidence and result in a material adverse effect on our results of operation or financial condition.

We could be harmed by network disruptions, security breaches, or other significant disruptions or failures of our IT infrastructure and related systems or of those we operate for certain of our customers.

To be successful, we need to continue to have available, for our and our customers’ use, a high capacity, reliable and secure network. We face the risk, as does any company, of a security breach, whether through cyber-attack, malware, computer viruses, sabotage, or other significant disruption of our IT infrastructure. As such, there is a risk of a security breach or disruption of the systems we operate, including possible unauthorized access to our and our customers’ proprietary rightsor classified information. We are also subject to breaches of our respective networks resulting in unauthorized utilization of our services or products, which subject us to the costs of providing those products or services, which are likely not recoverable. The secure maintenance and transmission of our and our customers’ information is a critical element of our operations. Our information technology and other systems that maintain and transmit customer information, or those of service providers or business partners, may be compromised by a malicious third-party penetration of our network security, or that of a third-party service provider or business partner, or impacted by advertent or inadvertent actions or inactions by our employees, or those of a third-party service provider or business partner. As a result, our or our customers’ information may be lost, disclosed, accessed, or taken without our or our customers’ consent, or our product and service may be used without payment.

Although we make significant efforts to maintain the security and integrity of these types of information and systems, there can be no assurance that our respective security efforts and measures will be effective or that attempted security breaches or disruptions would not be sufficientsuccessful or effective. Any significant impairmentdamaging, especially in light of the growing sophistication of cyber-attacks and intrusions sponsored by state or other interests. We may be unable to anticipate all potential types of attacks or intrusions or to implement adequate security barriers or other preventative measures. Certain of our intellectual property rightsbusiness units have been the subject of attempted and successful cyber-attacks in the past. We have researched these situations and do not believe any material internal, or customer information has been compromised.

Network disruptions, security breaches and other significant failures of the above-described systems could harm(i) disrupt the proper functioning of our businessnetworks and systems and therefore our operations or those of certain of our ability to compete. Also, protecting our intellectual property rights is costly and time consuming. Any increasecustomers; (ii) result in the unauthorized use of our services or products without payment; (iii) result in the unauthorized access to, and destruction, loss, theft, misappropriation or release of proprietary, confidential, sensitive or otherwise valuable information of ours or our customers, including trade secrets, which others could use to compete against us or for disruptive, destructive or otherwise harmful purposes and outcomes; and (iv) require significant management attention or financial resources to remedy the damages that result or to change our systems and processes. We could be subject to claims for contract breach, damages, credits, fines, penalties, termination, or other remedies from our customers, and subject to additional scrutiny or litigation by regulators, as a result of network disruptions, security breaches and other significant failures of the above-described systems, any or all of which could result in a loss of business, damage to our reputation among our customers and the public generally and have a negative impact on our results of operations, financial condition, and cash flows.

If one or more of our products fail, or is perceived to fail, or if there are technical defects, our reputation could be harmed, our market share may decline, and we could be subject to various liability claims.

Our products may contain undetected errors or defects that may result in failures or otherwise cause our products to fail to perform in accordance with customer expectations and contractual obligations. Moreover, our customers could incorrectly implement or inadvertently misuse our products, which could result in customer dissatisfaction and harm the perceived utility of our products and our brand. Because our customers use our products for mission-critical aspects of their business, any real or perceived errors or defects in, or other performance problems with, our products may damage our customers’ businesses and could significantly harm our reputation. If that occurs, we could lose future sales, or our existing customers could cancel our services, seek payment credits, seek damages against us, or delay or withhold payment to us, which could result in service credits that reduce our revenues, an increase in collection cycles for accounts receivable, an increase in our provision for uncollectible accounts, and ultimately harm our financial results. Product performance problems could result in loss of market share, reputational harm, failure to achieve market acceptance and the diversion of development resources.

In addition, since telecommunications billing and associated telecom taxes, and the related calculations and billing of telecom taxes, are inherently complex and require highly sophisticated information systems to administer, our billing system may experience errors or we may improperly operate the system, which could result in the system incorrectly calculating the fees owed by our customers or related taxes and administrative fees. Customers also may make indemnification or warranty claims against us, which could result in significant expense and risk of litigation.

Any product liability, intellectual property, warranty, or other claims against us could make itdamage our reputation and relationships with our customers and could require us to spend significant time and money in litigation or pay significant settlements or damages. Although we maintain general liability insurance, including coverage for errors and omissions, this coverage may not be sufficient to cover liabilities resulting from such claims. Also, our insurers may disclaim coverage. Our liability insurance also may not continue to be available to us on reasonable terms, in sufficient amounts, or at all. Any contract or product liability claims successfully brought against us would harm our business.

Our revenues and profits will suffer if our distributors and sales representatives fail to effectively market and distribute our products and services.

We rely on our distributors and representatives to market and distribute our BOSS products and services and NRS’ POS terminals and portfolio of services. We utilize a network of several hundred sub-distributors that sell our BOSS products and services to retail outlets throughout most of the United States. NRS’ POS terminal sales and marketing efforts are targeted, in part, to our nationwide network of BOSS Revolution retailers. If our distributors or sales representatives fail to effectively market or distribute our products and services, our ability to generate revenues and profits and grow our customer base in these products and services could be substantially impaired.

Our global operations subject us to geopolitical and other risks that may harm our results of operations and financial condition.

We have developers, product development personnel, other employees and senior management in different countries, and some business activities may be concentrated in one or more expensivegeographic areas. As a result, our ability to design, develop or sell products and services may be affected by:

Legal and regulatory requirements differ among jurisdictions worldwide. Violations of these laws and regulations could result in fines; criminal sanctions against us, our officers, or our employees; prohibitions on the conduct of our business; and damage to our reputation. Although we have policies, controls, and procedures designed to ensure compliance with these laws, our employees, contractors, or agents may violate our policies.

Our research and development (“R&D”) may be adversely affected by ongoing developments in Belarus and Ukraine.

We have a significant number of R&D personnel in Belarus. Belarus shares borders with both Russia and Ukraine. In February 2022, in connection with escalating tensions involving Russia and Ukraine, Russian military personnel stationed in Belarus were part of an invasion force by Russian forces into Ukraine. In response to the support and facilitation by Belarus for the invasion, the United States, the European Union, or EU, and various other nations imposed sanctions against multiple individuals and entities in Belarus. Other potential retaliatory measures could be taken by the United States and other countries, particularly if Belarus were to take a more active role in the conflict. While we continue to monitor the situation in Belarus closely, any prolonged or expanded unrest, military activities, or sanctions could have an adverse effect on our future product roadmap and R&D. We cannot predict whether additional sanctions or other measures will be imposed, or the nature of severity of those measures, and whether they will directly or indirectly impact our R&D in Belarus or elsewhere.

Further, our Belarussian R&D personnel could be impacted by retaliatory actions taken by third parties related to actual or perceived Belarussian actions in support of the invasion, including cyberattacks.

Should the military conflict expand to Belarus, our operations there could likely be impacted, including due to availability of personnel, electrical outages, cyber-attacks, and actual battles in areas where we have personnel.

Any of the foregoing could have an adverse impact on our ability to research and develop new technology, including corrections or enhancements of existing platforms supporting our current products and services or development of new or complementary offerings.

Global and regional economic conditions could materially adversely affect our business, results of operations, financial condition, and growth.

We have international operations with revenues outside the United States representing a substantial amount of our total revenues. As a result, our operations and performance depend significantly on global and regional economic conditions. Adverse macroeconomic conditions, including inflation, slower growth, or recession, new or increased tariffs and other barriers to trade, changes to fiscal and monetary policy, tighter credit, higher interest rates, high unemployment, and currency fluctuations could materially adversely affect demand for our products and services. In addition, consumer confidence and spending could be adversely affected in response to financial market volatility, negative financial news, conditions in the real estate and mortgage markets, declines in income or asset values, changes to fuel and other energy costs, labor and healthcare costs, and other economic factors.

Failure in our data center or services could lead to significant costs and disruptions.

All data centers, including ours, are subject to various points of failure. Problems with cooling equipment, generators, uninterruptible power supply, routers, switches, or other equipment, whether or not within our control, could result in service interruptions for our customers as well as equipment damage. Any failure or downtime could affect a significant percentage of our customers. The destruction or severe impairment of our data center facilities could result in significant downtime of our services and the loss of customer data.

Our ability to provide cloud-based communication services is dependent upon our physical and cloud-based infrastructure. While most of our physical equipment required for providing these services is redundant in nature, certain types of failures or malfunctioning of critical hardware/software equipment, including but not limited to fire, water or other physical damage may impact our ability to deliver continuous service to our customers. Acts of God or terrorism or vandalism or negligence or gross negligence of person(s) currently or formerly associated with us including failure to properly update and maintain infrastructure may result in loss of revenue, profitability, and failure to retain and acquire new customers.

Our ability to recover from disasters or failures, if and when they occur, is paramount to offering continued service to our existing customers. We maintain redundant physical infrastructure between our data centers in Newark, New Jersey and Somerset, New Jersey for disaster recovery. We maintain a core site in a data center in São Paulo, Brazil and telecommunications points of presence in multiple cities in Brazil. We operate multiple server sites in data centers in Canada, running UCaaS software licensed from a third party. We also operate servers in data centers in Hong Kong, London, and Spain. These network footprints do not guarantee continued reliability if a catastrophic event occurs. Despite implementation of network security measures, our servers may be vulnerable to computer viruses, break-ins, and similar disruptions from unauthorized tampering with our computer systems including, but not limited to, denial of service attacks. In addition, if there is a breach or alleged breach of security or privacy involving our services, including but not limited to data loss, or if any third party undertakes illegal or harmful actions using our communications or e-commerce services, our business and reputation could suffer substantial adverse publicity and impairment. We have experienced interruptions in service in the past. We have taken and continue to take steps to improve our infrastructure to prevent service interruptions.

In addition to our physical infrastructure, we have a cloud infrastructure deployment with Amazon Web Services, or AWS, and Google Cloud that supplements and extends our physical infrastructure. We utilize AWS’ and Google Cloud’s high availability configurations using multiple availability zones and we have services deployed in multiple AWS regions. However, we do not have cross region redundancy, which means we cannot guarantee continued reliability if AWS or Google Cloud suffers a catastrophic event which disrupts a region in which we have our services deployed. If there were a failure to respond quickly to problems, or such a catastrophic event were to occur, our customers may experience service interruptions and we may suffer customer losses.

Our financial performance is subject to risks associated with changes in the value of the U.S. dollar relative to other currencies.

Our primary exposure to movements in foreign currency exchange rates relates to non–U.S. dollar–denominated revenues and operating expenses. The strengthening of foreign currencies may increase our costs denominated in those currencies, thus adversely affecting our earnings. The weakening of foreign currencies relative to the U.S. dollar adversely affects the U.S. dollar value of our foreign currency–denominated revenues and earnings and could lead us to raise international pricing, potentially reducing demand for our products and services. In some circumstances, for competitive or other reasons, we may decide not to raise international pricing to offset the U.S. dollar’s strengthening, which would adversely affect the U.S. dollar value of our foreign currency–denominated revenue and earnings.

We depend upon industry standard protocols and third-party software, including but not limited to open-source software.

We rely on non-proprietary third-party software, some of which may be open source. We may be subject to additional royalties, license or trademark infringement costs or other unknown costs when one or more of these third-party technologies are affected or need to be replaced due to end-of-support or end-of-sale of such third parties.

Certain functions related to our business depend on a single supplier or small group of suppliers to carry out our business, and the inability to do business with some or all of these suppliers could have a materially adverse effect on our business and harmfinancial results.

If the services of any of the single suppliers or small group of suppliers, including, without limitation, software from third-party service providers used in certain of our operating results.

Companiesproducts and services, that we depend on were unavailable, or available only in decreased capacity or at less advantageous terms, this could result in interruptions to our ability to provide certain services, could cause reduction in service and/or quality as the function is transitioned to an alternate provider, if an alternate provider is available, or could increase our cost, which in the telecommunications industry and other industries in whichcurrent competitive environment, we compete own large numbers of patents, copyrights and trademarks and frequently enter into litigation based on allegations of infringement or other violations of intellectual property rights. As we face increasing competition, the possibility of intellectual property claims against us grows. Although we do not believe that we infringe upon the intellectual property rights of others, our technologies may not be able to withstandpass along to customers. Accordingly, any third-party claimsof these events could materially and negatively impact our business, our revenues, our profits, and our relationships with customers.

Natural or rights againstman-made disasters could have an adverse effect on our technological infrastructure, which could have a material adverse effect on our results of operations and financial condition.

Natural disasters, terrorist acts, acts of war, cyberattacks or other breaches of network or information technology security may cause equipment failures or disrupt our operations. Although we make significant efforts towards managing disaster recovery and business continuity plans, our inability to operate our networks because of such events, even for a limited period of time, may result in loss of revenue, significant expenses and/or loss of market share to other providers, which could have a material adverse effect on our results of operations and financial condition.

Our success depends in part upon our ability to provide customer service that effectively supports the needs of our customers.

Providing customer service effectively requires that our customer support personnel have industry-specific technical knowledge and expertise. Our support personnel require extensive training on our products and services, which may make it difficult to scale up our support operations rapidly or effectively. The importance of high-quality customer support will increase as we expand our business and pursue new customers. If we do not help our customers quickly resolve post-implementation issues and provide effective ongoing support, our ability to sell additional features and services to existing customers will suffer and our reputation may be harmed.

Changes to rates by our suppliers and increasing regulatory charges or tariffs may require us to raise prices, which could impact results.

Our upstream carriers, suppliers and vendors may increase their use.prices thus directly impacting our direct cost of revenues, which would affect our earnings. Interconnected VoIP traffic may be subject to increased charges. Should this occur, the rates paid to our underlying carriers may increase, which could reduce our profitability. Future changes in tariffs by regulatory agencies or application of tariff requirements to currently un-tariffed products or services could affect the price and sales of our products for a certain set of customers. Changes in our underlying direct costs of revenues may cause us to increase the rates we charge our customers, which could make us less competitive and impact our sales and retention of existing customers.

Our customers, particularly our IDT Global customers, could experience financial difficulties, which could adversely affect our revenues and profitability if we experience difficulties in collecting our receivables.

As a provider of international long-distance services, we depend upon sales of transmission and termination of traffic to other long-distance providers and the collection of receivables from these customers. The wholesale telecommunications market continues to feature many smaller, less financially stable companies. If weakness in the telecommunications industry or the global economy reduces our ability to collect our accounts receivable from our major customers, particularly our wholesale customers, our profitability may be substantially reduced. While our most significant customers, from a revenue perspective, vary from quarter to quarter, our five largest IDT Global customers collectively accounted for 4.7% and 4.6% of our total revenues in fiscal 2023 and fiscal 2022, respectively. Our IDT Global customers with the five largest receivables balances collectively accounted for 1.6% and 12.2% of our total gross trade accounts receivable at July 31, 2023 and 2022, respectively. This concentration of revenues and receivables increases our exposure to non-payment by our larger customers, and we may experience significant write-offs if any of our large customers fail to pay their outstanding balances, which could adversely affect our revenues and profitability.

IDT TelecomWe rely on highly skilled personnel and, if we are unable to retain or motivate key personnel, hire qualified personnel, or maintain our corporate culture, we may not be able to grow effectively.

We believe that our corporate culture fosters innovation, creativity, and teamwork. Our performance largely depends on the talents and efforts of highly skilled individuals. Our future success depends on our continuing ability to identify, hire, develop, motivate, and retain highly skilled personnel for all areas of our organization, in particular our technology and software engineering organization. Competition for qualified technology and engineering employees is intense and our compensation arrangements may not always be successful in attracting new employees and retaining and motivating our existing employees. Our continued ability to compete effectively depends on our ability to attract new employees and to retain and motivate our existing employees.

New and existing technologies could affect our ability to track the results of ads and/or could block ads online, which would harm our business.

A significant portion of our revenues are derived from customers acquired in connection with the display of advertisements online. Technologies have been developed to make tracking the results of our online advertisements more difficult or to block the display of advertisements altogether and some providers of online services have integrated technologies that could potentially impair the core functionality of third-party digital advertising. As a result, such technologies and tools could adversely affect our operating results.

Our business, results of operation and financial condition could be adversely affected by the COVID-19 pandemic and the restrictions put in place in connection therewith.

In additionMay 2023, the World Health Organization declared an end to IDT Corporation’s patents,COVID-19 as a public health emergency. As of the date of this Annual Report, we continue to monitor the situation.

We responded to the global outbreak of COVID-19 by taking steps to mitigate the potential risks to us posed by its spread and the impact of the restrictions put in place by governments to protect the population. We executed our net2phone subsidiary currently owns 29 issued patentsbusiness continuity plan and implemented a comprehensive set of actions for the health and safety of our employees, customers, and business partners. Our employees transitioned to work-from-home during the third quarter of fiscal 2020. Beginning in the fourth quarter of fiscal 2021, our employees returned to work in our offices on a hybrid basis.

We continue to implement strong physical and cyber-security measures to ensure our systems remain functional to both serve our operational needs with a remote workforce and to provide uninterrupted service to our customers.

If the COVID-19 pandemic resurges and has 2 pending patent applicationsa more significant impact than currently, our business, operations, and financial condition could be impacted in more significant ways. 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.

Our international operations subject us to additional risks which could have an adverse effect on our business, operating results, and financial condition.

We have attempted to control our operating expenses by utilizing lower-cost labor in foreign countries such as Belarus, Guatemala, and Israel and we may in the future expand our reliance on offshore labor to other countries. Our employees in Belarus and Israel primarily help develop, test, and maintain certain of our technology. Our labor source in Guatemala primarily performs certain call center, administrative, and customer acquisition functions. We also have significant operations in Brazil, Uruguay, and Argentina as a result of net2phone’s growth.

Countries outside of the United States may be subject to relatively higher degrees of political and social instability and may lack the infrastructure to withstand political unrest or natural disasters. The occurrence of natural disasters, pandemics such as COVID-19, or political or economic instability in these countries could interfere with work performed by these labor sources or could result in our having to replace or reduce these labor sources. If countries in which we operate experience civil or political unrest or acts of terrorism, especially when such unrest leads to an unseating of the established government, our operations in such countries could be materially impaired. Our vendors in other countries could potentially shut down suddenly for any reason, including financial problems or personnel issues. Such disruptions could decrease efficiency, increase our costs, and have an adverse effect on our business or results of operations.

The practice of utilizing labor based in foreign countries has come under increased scrutiny in the United States. net2phone has 5Governmental authorities could seek to impose financial costs or restrictions on foreign issued patents, and no patent applications pending abroad.

net2phone owns at least 15 trademark and service mark registrations and at least 2 pending applicationscompanies providing services to customers or companies in the United States. net2phone owns at least 115 trademarkGovernmental authorities may attempt to prohibit or otherwise discourage us from sourcing services from offshore labor.

The FCPA and service mark registrationsother applicable anti-corruption laws and at least 2 pending applications in various foreign countries. net2phone’s most important markregulations prohibit certain types of payments by our employees, vendors, and agents. Any violation of the applicable anti-corruption laws or regulations by us, our subsidiaries or our local agents could expose us to significant penalties, fines, settlements, costs, and consent orders that may curtail or restrict our business as it is “NET2PHONE.” net2phone has made a significant investment in protecting this mark,currently conducted and net2phone believes it has achieved recognition incould have an adverse effect on our business, financial condition, or results of operations.

Weakness of the United States dollar in relation to the currencies used in these foreign countries may also reduce the savings achievable through this strategy and abroad. net2phone is currently engaged incould have an international filing program to file trademark applications for trademark registrations of the mark NET2PHONE in a number of foreign countries.

Other

We also currently own three patents and three pending patent applications and three registrations in the United States that relate toadverse effect on our business, operations we oversee or businesses-in-development. We also own or license certain trademark and service mark registrations and pending applications in the United States and additional registrations abroad.

RESEARCH AND DEVELOPMENT

We incurred no research and development costs during fiscal 2017 and fiscal 2016. In fiscal 2015, we incurred research and development costs of $1.7 million, all of which related to Fabrix.

EMPLOYEES

As of October 1, 2017, we had a total of 1,224 employees, of which 1,221 were full-time employees.

Item 1A. Risk Factors.

RISK FACTORS

Our business, operating results or financial condition, could be materially adversely affected by anyand results of the following risks as well as the other risks highlighted elsewhere in this document, particularly the discussions about regulation, competition and intellectual property. The trading price of our Class B common stock could decline due to any of these risks.operations.

Risks Related to Our BusinessesNRS Business

Substantial and increasingly intense competition in the POS industry may harm NRS’ business.

NRS competes in the POS market that is characterized by vigorous competition, changing technology, evolving industry standards, changing customer needs, and frequent introductions of new products and services. We expect competition to intensify in the future as existing and new competitors introduce new services or enhance existing services. NRS competes against many companies to attract customers, and some of these companies have greater financial resources and substantially larger bases of customers than NRS does, which may provide them with significant competitive advantages. These companies may devote greater resources to the development, promotion, and sale of products and services, may achieve economies of scale due to the size of their customer bases, and may more effectively introduce their own innovative products and services that adversely impacts NRS’ growth. If some or all of NRS’ competitors focus additional resources on our target markets, NRS’ growth may slow, or we may lose customers due to the competition.

NRS may also face pricing pressures from competitors, which may result in the need for NRS to alter the pricing that it offers and could reduce our profitability.

If NRS fails to increase advertising on its platform, our business could be adversely affected.

NRS’ strategy includes increasing its revenues from brand advertising. Brands may not do business with NRS or may reduce the amounts they are willing to spend to advertise if NRS does not deliver ads, and other commercial content and marketing programs in an effective manner, or if they do not believe that their investment in advertising with NRS will generate a competitive return relative to other alternatives. NRS’ ability to increase the number of brands that use its brand advertising, and ultimately to generate advertising and marketing services revenues, depends on a number of factors, many of which are outside of our control. If NRS fails to increase advertising on its platform, our business could be adversely affected.

The long-term success of NRS depends on its ability to develop products and services to address the rapidly evolving market for POS products and services, and, if it is not able to implement successful enhancements and new features for its products and services, our business could be materially and adversely affected.

NRS’ success will depend, in part, on its ability to develop new technologies and to adapt to technological changes and evolving industry standards. New services and technologies may be superior to, impair, or render obsolete the POS products and services that NRS currently offers or the technologies NRS currently uses to provide them. Incorporating new technologies into NRS’ POS products and services may require substantial expenditures and take considerable time, and NRS may not be successful in realizing a return on these development efforts in a timely manner or at all. NRS’ ability to develop new products and services may be inhibited by industry-wide standards, existing and future laws and regulations, resistance to change from its customers, which includes NRS’ sellers and their buyers, or third parties’ intellectual property rights. If NRS is unable to provide enhancements and new features for its products and services or to develop new products and services that achieve market acceptance or that keep pace with rapid technological developments and evolving industry standards, our business would be materially and adversely affected.

Risks Related to Our net2phone Business

net2phone’s VoIP or cloud-based communications service competes against established well financed alternative voice communication providers (such as Ring Central, 8x8 and Five9), who may provide comparable services at comparable or lower pricing.

Pricing in the telecommunications industry is very fluid and competitive. Price is often a substantial motivation factor in a customer’s decision to switch to net2phone’s cloud-based communications products and services. net2phone’s competitors may reduce their rates, which may require it to reduce its rates, which would affect our revenues and profitability, or otherwise make our pricing non-competitive. net2phone may be at a disadvantage compared with those competitors who have substantially greater resources than us or may otherwise be better positioned to withstand an extended period of downward pricing pressure.

Many of net2phone’s current and potential competitors have longer operating histories, significantly greater resources and brand awareness, and a larger base of customers than we have. As a result, these competitors may have greater credibility with net2phone’s existing and potential customers. net2phone’s competitors may also offer bundled service arrangements that present a more differentiated or better integrated product to customers. Announcements, or expectations, as to the introduction of new products and technologies by net2phone’s competitors or net2phone could cause customers to defer purchases of net2phone’s existing products, which also could have a material adverse effect on our business, financial condition, or operating results.

net2phone depends in part upon the capacity, reliability, and performance of several third-party providers and their network infrastructure, the failure of which could cause delays or interruptions of net2phone’s service and impact our revenue and profitability.

net2phone depends on several third-party providers to provide uninterrupted and error-free service to maintain its operations. net2phone does not have control over these providers, and some of these providers are also its competitors. net2phone may be subject to interruptions or delays in their service and its reputation and business may be harmed. The failure of any of these third party service providers to properly maintain services may result in negative consequences to net2phone, including but not limited to: (i) a loss of customers, (ii) adverse impact on its reputation, (iii) negative publicity, (iv) negative impact on its ability to acquire customers, (v) negative impact on its revenue and profitability, (vi) potential law suits for not reaching emergency E-911 services, and (vii) potential law suits for loss of business and loss of reputation. These third-party providers include but are not limited to: 4PSA, an opensource, Kamilio-based platform provider based in Romania and NetSapiens Inc. based in San Diego, CA. 4PSA is net2phone’s current communications platform in most of South America and continues to serve as a legacy platform for a smaller percentage of customers in the U.S. NetSapiens is net2phone’s current platform for its customers in Canada.

Internet Bandwidth Providers. net2phone’s cloud-based communications service requires its customers to have an operative broadband Internet connection and an electrical power supply, which are provided by the customer’s broadband Internet service provider and electric utility company and not by net2phone. The quality of some broadband Internet connections may be too poor for customers to use net2phone’s services properly. In addition, if there is any interruption to a customer’s broadband Internet service or electrical power supply, that customer will be unable to make or receive calls, including emergency calls, using net2phone’s service. In addition, Internet backbone providers may be able to block, degrade or charge for access to, or the bandwidth use of certain of net2phone’s products and services which could have a negative effect on its services and could lead to additional expenses and the loss of users. Further, customers who access net2phone’s mobile application (or future applications) through their smartphones must have a high-speed connection to use its services. This access is provided by companies that have significant and increasing market power in the broadband and Internet access marketplace and some of these providers offer products and services that directly compete with net2phone’s offerings, which give them a significant competitive advantage.

Tier 1 and non-Tier 1 Telecom suppliers for Telecom Origination and Termination Services. net2phone depends on these companies to provide telecom services, sourcing of DID, porting of numbers, and delivering telephone calls from and to endpoints and devices on our network. If net2phone fails to maintain reliable connectivity or performance with its upstream carriers it could significantly reduce customer demand for its services and damage its business.

E-911 and other emergency service providers. net2phone maintains an agreement with an E-911 provider to assist it in routing and terminating emergency calls directly to an emergency service dispatcher at the public-safety answering point, or PSAP, in the area of the customer’s registered location. net2phone also contract with a provider for the national call center that operates 24 hours a day, seven days a week to receive certain emergency calls and with several companies that maintain PSAP databases for the purpose of deploying and operating E-911 services. The dispatcher will have automatic access to the customer’s telephone number and registered location information. If a customer moves their service to a new location, the customer’s registered location information must be updated and verified by the customer. Until that takes place, the customer will have to verbally advise the emergency dispatcher of his or her actual location at the time of an E-911 call. This can lead to delays in the delivery of emergency services. Interruptions in service from these vendors could also cause failures in net2phone’s customers’ access to E-911 services and expose it to liability.

Local number portability providers. net2phone has agreements with companies that initiate its local number portability, which allows new customers to retain their existing telephone numbers when subscribing to its services. net2phone needs to work with these companies to properly port numbers. The failure to port numbers may cause net2phone to lose customers.

net2phone faces risks from the outsourcing of the manufacturing of its desktop telephones (“desktop devices”).

net2phone primarily sells Polycom, Yealink and Grandstream-branded desktop devices, although, it supports other third-party devices as well. These desktop devices are being manufactured by vendors in China. Recent supply-chain challenges in China and global ramifications of supply-chain difficulties, the U.S. trade war with China, including trade protection measures such as tariffs, and the effects of any new wave of COVID-19 infections or another pandemic may cause disruptions in obtaining its desktop devices. This may increase pricing, slow delivery times or may force net2phone to find another third-party manufacturer of its branded desktop devices.

net2phone targets sales to small, mid-market and enterprise customers. Not properly managing these customers could negatively affect our business, cash flow and operations.

A substantial percentage of net2phone’s revenues comes from small and medium-sized businesses. These customers may be more adversely affected by economic downturns than larger, more established businesses. The majority of net2phone’s customers pay for subscriptions with credit cards. Weakness in certain segments of the credit markets in the U.S. and global economies may result in increased numbers of rejected credit and debit card payments, which could negatively affect net2phone’s business. If small and medium-sized businesses experience financial hardship because of a weakening economy, industry consolidation, or any other reason, the overall demand for net2phone’s products and services could be materially and adversely affected.

Selling to larger enterprise customers also contains inherent risks and uncertainties. The loss of a key customer or the failure of some of them to renew or to continue to recommend net2phone’s products may have a material negative impact on its results. net2phone has a limited history of selling its services to larger businesses and may experience challenges in configuring and providing ongoing support for the products it sells to large customers. Larger customers’ networks are often more complex than those of smaller customers, and the configuration of services for these customers usually requires customer assistance. There is no guarantee that the customer will make available to net2phone the necessary personnel and other resources for a successful configuration of services. Lack of assistance from the customers or lack of local resources may prevent net2phone from properly configuring its services for these customers, which can in turn adversely impact the quality of services that it delivers over its customers’ networks, and/or may result in delays in the implementation of its services and impact the quality and ability to continue to provide the services. This could also create a public perception that net2phone is unable to deliver high quality service to its customers, which could harm its reputation. In addition to the foregoing, larger customers tend to require higher levels of customer service and individual attention, which may increase net2phone’s costs for implementing and delivering services.

If net2phone’s existing customers terminate their subscriptions or reduce their subscriptions and related usage, its revenues and earnings will be harmed, and we will be required to spend more money to grow net2phone’s customer base.

net2phone expects to continue to derive a significant portion of its revenues from existing customers. As a result, retaining its existing customers is critical to its future operating results. net2phone offers monthly, annual and multiple-year contracts to its customers, generally with 30 days’ notice required for reductions in the number of seats. Increases in the number of seats can be provisioned almost immediately.

Subscriptions and related usage by existing customers may decrease if:

If net2phone’s 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. net2phone incurs significant costs and expenses, including sales and marketing expenses, to acquire new customers, and those costs and expenses are an important factor in determining our profitability. There can be no assurance that net2phone’s efforts to acquire new customers will be successful.

net2phone must acquire new customers on an ongoing basis to maintain and increase its customers and revenues while the significant costs to acquire new customers may hinder profitability.

net2phone will have to acquire new customers to increase revenues. net2phone incurs significant costs to acquire new customers, and those costs are an important factor in determining our profitability. Therefore, if net2phone is unsuccessful in retaining customers or is required to spend significant amounts to acquire new customers, its revenue and or profits would decrease, which would negatively affect profitability. Sales and marketing expenditures are an ongoing requirement of net2phone’s business as it strives to acquire more new customers.

net2phone’s customer churn rate may increase in future periods, which may adversely impact its revenue or require it to spend more money to grow its customer base.

net2phone’s customers generally have initial service periods of between two and three years and may discontinue their subscriptions for services after the expiration of their initial subscription period. In addition, net2phone’s customers may renew for lower subscription amounts or for shorter contract lengths. net2phone may not accurately predict cancellation rates for its customers. net2phone’s cancellation rates may increase or fluctuate because of several factors, including customer needs, pricing changes, number of applications used by its customers, customer satisfaction with its service, the acquisition of net2phone’s customers by other companies, and deteriorating general economic conditions. If net2phone’s customers do not renew their subscriptions for its service or decrease the amount they spend with net2phone, its revenue will decline, and our business will suffer.

net2phone may not be able to scale its business efficiently or quickly enough to meet its customers’ growing needs, in which case our operating results could be harmed.

As usage of net2phone’s cloud-based communications services by mid-market and larger distributed enterprises expands and as customers continue to integrate its services across their enterprises, net2phone is required to devote additional resources to improving its application architecture, integrating net2phone’s products and applications across our technology platform as well as expanding integration and performance. net2phone will need to appropriately scale its internal business systems and services organization, including its onboarding and customer support services to serve a growing customer base. Any failure of or delay in these efforts could impair net2phone’s systems’ performance and reduce customer satisfaction, which could result in decreased sales to new customers and lower renewal rates by existing customers and eventually hurt net2phone’s revenue growth and its reputation. We cannot guarantee that the expansion and improvements to our infrastructure and systems will be fully or effectively implemented on a timely basis, if at all, which failure may reduce our revenue and earnings and adversely impact our financial results.

net2phone may not realize the anticipated benefits of its acquisition of Integra’s CCaaS business.

On March 3, 2022, net2phone purchased all of the outstanding shares of Onwaba S.R.L. and Gem S.R.L. Onwaba S.R.L. and Gem S.R.L. are located in Uruguay and use the trade name Integra. Integra provides cloud-based CCaaS in the Americas and Europe.

The success of the acquisition of Integra will depend, in part, on net2phone’s ability to provide its customers and channel partners with a robust stand-alone contact center solution or an intelligently integrated UCaaS and CCaaS solution. The target market for the Integra CCaaS solution is two-fold: (i) businesses and other entities with embedded service and support centers; and (ii) contact centers / BPO providers. Consistent with businesses across the globe that have been moving their on-premise phone systems to the cloud, these service and support centers and contact centers are migrating in a similar fashion, propelled by the growing hybrid and remote work environments. The Integra CCaaS platform is layered with a development surface which allows for custom deployments and sophisticated work force management, where the solution is tailored to the center’s work-flow requirements. This customization will provide for an additional layer of stickiness, which is expected to translate into longer term service periods with the end user. For this reason, we also expect to see increased stickiness with our current and future UCaaS customers that bundle CCaaS into their product suite. We also expect this solution set to open for us a whole new segment of channel partners that specifically target CCaaS audiences. Our capacity to realize these anticipated benefits is subject to certain risks, including, among others, our ability to successfully integrate the CCaaS business, and the risk that the CCaaS business will not perform as expected.

If we are not able to successfully integrate Integra’s CCaaS business within the anticipated time frame, or at all, the anticipated synergies, operational efficiencies and other benefits of the acquisition may not be realized fully or may take longer to realize than expected, and we may not perform as expected.

Integrating Integra’s CCaaS business may be more difficult, time-consuming or costly than expected.

There can be no assurances that Integra’s CCaaS business can be integrated successfully. It is possible that the integration process could result in the loss of key employees, the disruption of net2phone’s ongoing UCaaS business or unexpected integration issues, such as higher than expected integration costs and an overall post-completion integration process that takes longer than originally anticipated. Specifically, issues that must be addressed in integrating the operations of Integra in order to realize the anticipated benefits of the acquisition, so net2phone performs as expected include, among others:

Risks Related to Our Traditional Communications Segment

Each of our telecommunications lines of businessBOSS Revolution Calling and IDT Global businesses is highly sensitive to declining prices, which may adversely affect our revenues and margins.profitability.

The worldwide telecommunications industry is characterized by intense price competition, which has resulted in declines in both our average per-minute price realizations and our average per-minute termination costs. Many of our competitors continue to aggressively price their services.services or offer them for free. The intense competition has led to continued erosion in our pricing power, in both our retail and wholesale markets, and we have generally had to pass along all or some of the savings we achieve on our per-minute costs to our customers in the form of lower prices. In the case of some international calling locations, when average per minute termination cost decline to a nominal amount, indirect competitors, such as wireless carriers, may include calls to those locations at no extra cost, which increases our risk of losing customers. For example, following regulatory changes intended to increase domestic competition in the Mexican telecommunications market, the cost of terminating international calls to Mexico declined significantly. As a result, many of our competitors, including some of the large U.S. mobile operators, began offering unlimited Mexico calling as part of their monthly pricing plans, which caused a decline in our minutes of use and revenue. In July 2016, we significantly reduced pricing on Boss Revolution’s U.S. to Mexico corridor, which accelerated the decline in our revenue and gross profit.

Any price increase by us in pricingeither our BOSS Revolution Calling, or IDT Global business may result in our prices not being asbecoming less attractive to customers, which may result in a reduction of revenue. If these trends in pricing continue or accelerate, it could have a material adverse effect on the revenues generated by our telecommunicationsBOSS Revolution Calling and IDT Global businesses and/or our gross margins.profitability.

Because our Boss Revolution and other retail products generate a significant portion of our revenue, our growth and our results of operations are substantially dependent upon growth in these products.

Our growth and our results of operations are substantially dependent upon growth in our Boss Revolution and other retail products that currently generate a significant portion of our revenue. We compete in the international prepaid calling market with Tier 1 mobile network operators who offer flat rate international calling plans, other PIN-less prepaid voice offerings, prepaid calling card providers, mobile virtual network operators (or MVNOs) with aggressive international rate plans, and VoIP and other “over the top” (OTT) service providers.

Many of these companies, such as AT&T, Verizon, T-Mobile and Sprint, are substantially larger and have greater financial, technical, engineering, personnel and marketing resources, longer operating histories, greater name recognition and larger customer bases than we do. The use by these competitors of their resources in or affecting the international prepaid calling market could significantly impact our ability to compete against them successfully.

In addition to these larger competitors, we face significant competition from smaller prepaid calling providers, who from time-to-time offer rates that are substantially below our rates, and in some instances below what we believe to be the cost to provide the service, to gain market share. This type of pricing by one or more competitors can adversely affect our revenues, as they gain market share at our expense, and our gross margins, if we lower rates to better compete.

The continued growth of Over-The-Top calling and messaging services, such as Skype, Viber WhatsApp has adversely affected the sales of Boss Revolution and our other prepaid calling services. We expect the popularity of IP-based services—many of which offer voice communications for free provided both the caller and recipient have a broadband connection—to continue to increase, which may result in increased substitution and pricing pressure on our Boss Revolution and other international prepaid calling service offerings.

Certain wireless operators have been rolling out unlimited international long-distance plans that include international destinations to which customers can place direct calls from their mobile phones without time limitation. These plans now include some of our most popular international destinations. The growth of these “international unlimited” plans adversely affects our revenues as these operators gain subscriber market share.

If we are unable to grow our Boss Revolution and other retail products, it could have a material adverse effect on the revenues generated by our telecommunications businesses, our gross margins and/or our profits.

We may be unable to achieve some, all or any of the benefits that we expect to achieve from our plan to separate our businesses into three separate entities.

In August 2015, our Board of Directors approved a plan to reorganize us into three separate entities by spinning off two non-core business units and certain assets, one of which was Zedge, to our stockholders, which we completed on June 1, 2016. Throughout fiscal 2017, we prepared to spin off additional non-core assets including our interests in two clinical and early stage pharmaceutical companies - Rafael Pharmaceuticals and Lipomedix Pharmaceuticals Ltd. - and our real estate holdings to our shareholders as Rafael Holdings, Inc. In addition, we intend to contribute $50 million to $60 million in cash to Rafael Holdings, Inc. prior to the spin-off.

Following the spin-offs, we expect to have sufficient liquidity to support the development of our business for the medium term, but there can be no assurance of such liquidity. In the future, however, we may require additional financing for capital requirements and growth initiatives. Accordingly, we will depend on our ability to generate cash flows from operations and to borrow funds and issue securities in the capital markets to maintain and expand our business. We may need to incur debt on terms and at interest rates that may not be as favorable as those historically enjoyed by us. If additional financing is not available when required or is not available on acceptable terms, we may be unable to operate our business as planned or at all, fund our expansion, successfully promote our business, develop or enhance our products and services, take advantage of business opportunities or respond to competitive pressures, any of which could have a material adverse effect on our products and business, financial condition and results of operations.

By separating entities such as Zedge and Rafael Holdings, Inc. from us, there is a risk that we may be more susceptible to stock market fluctuations and other adverse events than we would have been due to a reduction in market diversification. We expect that the aggregate market value of the three separate companies will exceed the market capitalization of all the businesses being operated by us because investors will be able to invest in a company that they are attracted to without having to also invest in the other two companies. However, this expectation may be incorrect, and the aggregate value of the three separate companies may be less than the market capitalization of the businesses being operated by us.

We may not be able to obtain sufficient or cost-effective termination capacity to particular destinations.destinations, which could adversely affect our revenues and profits.

Most of our telecommunicationstelecommunications’ traffic is terminated through third-party providers. In order to support our minutes-of-useminutes of use demands and geographic footprint, we may need to obtain additional termination capacity or destinations. We may not be able to obtain sufficient termination capacity from high-quality carriers to particular destinations or may have to pay significant amounts to obtain such capacity. This could result in our not being able to support our minutes-of-useminutes of use demands or in higher cost-per-minute to particular destinations, which could adversely affect our revenues and margins.profits.

The termination of our carrier agreements with foreign partners or our inability to enter into carrier agreements in the future could materially and adversely affect our ability to compete, which could reduce our revenues and profits.

We rely upon our carrier agreements with foreign partners in order to provide our telecommunications services to our customers. These carrier agreements are for finite terms and, therefore, there can be no guarantee that these agreements will be renewed at all or on favorable terms to us. Our ability to compete would be adversely affected if our carrier agreements were terminated or we were unable to enter into carrier agreements in the future to provide our telecommunications services to our customers, which could result in a reduction of our revenues and profits.

As more competitors offer international airtime top-up service, our ability to secure competitive direct or indirect, exclusive or non-exclusive, agreements with international wireless operators could become more difficult or less attractive, thereby having an adverse effect on our revenues and operations.

Our customers, particularly our Wholesale Carrier Services customers, could experience financial difficulties, which could adversely affect our revenues and profitability if we experience difficulties in collecting our receivables.

As a provider of international long-distance services, we depend upon sales of transmission and termination of traffic to other long distance providers and the collection of receivables from these customers. The wholesale telecommunications market continues to feature many smaller, less financially stable companies. If weakness in the telecommunications industry or the global economy reduces our ability to collect our accounts receivable from our major customers, particularly our wholesale customers, our profitability may be substantially reduced. While our most significant customers, from a revenue perspective, vary from quarter to quarter, our five largest Wholesale Carrier Services customers collectively accounted for 10.6% and 6.3% of total consolidated revenues in fiscal 2017 and fiscal 2016, respectively. Our Wholesale Carrier Services customers with the five largest receivables balances collectively accounted for 34.9% and 21.5% of the consolidated gross trade accounts receivable at July 31, 2017 and 2016, respectively. This concentration of revenues and receivables increases our exposure to non-payment by our larger customers, and we may experience significant write-offs if any of our large customers fail to pay their outstanding balances, which could adversely affect our revenues and profitability.

Our revenues will suffer if our distributors and sales representatives fail to effectively market and distribute our Boss Revolution voice and payment services, as well as our traditional disposable calling cards.

We rely on our distributors and representatives to market and distribute our Boss Revolution products, our traditional disposable prepaid calling card products, our international airtime top-up offerings and other payment services. We utilize a network of several hundred sub-distributors that sell our Boss Revolution products, traditional disposable prepaid calling cards, and international airtime top-up to retail outlets throughout most of the United States. In foreign countries, we are dependent upon our distributors and independent sales representatives, many of which sell services or products for other companies. As a result, we cannot control whether these foreign distributors and sales representatives will devote sufficient efforts to selling our services. In addition, we may not succeed in finding capable distributors, retailers and sales representatives in new markets that we may enter. If our distributors or sales representatives fail to effectively market or distribute our Boss Revolution products, prepaid calling card products, international airtime top-up offerings and other services, our ability to generate revenues and grow our customer base could be substantially impaired.

Natural or man-made disasters could have an adverse effect on our technological infrastructure.

Natural disasters, terrorist acts, acts of war, cyber-attacks or other breaches of network or information technology security may cause equipment failures or disrupt our operations. Our inability to operate our telecommunications networks because of such events, even for a limited period of time, may result in loss of revenue, significant expenses and/or loss of market share to other communications providers, which could have a material adverse effect on our results of operations and financial condition.

Certain functions related to our business depend on a single supplier or small group of suppliers to carry out our business, and the inability to do business with some or all of these suppliers could have a materially adverse effect on our business and financial results.

If the services of any of the single suppliers or small group of suppliers that we depend on were unavailable, or available only in decreased capacity or at less advantageous terms, this could result in interruptions to our ability to provide certain services, could cause reduction in service and/or quality as the function is transitioned to an alternate provider, if an alternate provider is available, or could increase our cost, which in the current competitive environment, we may not be able to pass along to customers.

For example and without limitation, the platforms that support our Hosted PBX business and our money remittance business are each leased from a third party. These platforms are susceptible to, and have incurred, service interruptions, which can occur frequently and can be lengthy in duration. Any such service interruption of the platform could effectively temporarily cease or otherwise materially impair operations of our applicable business. In addition, if these platforms became permanently unavailable for any reason, including, without limitation, because the third-party owner of such platform no longer provided the service for any reason, then our applicable business would be materially negatively affected.

Accordingly, any of these events could materially and negatively impact our business, our revenues, our margins, and our relationships with customers.

We could be harmed by network disruptions, security breaches, or other significant disruptions or failures of our IT infrastructure and related systems or of those we operate for certain of our customers.

To be successful, we need to continue to have available, for our and our customers’ use, a high capacity, reliable and secure network. We face the risk, as does any company, of a security breach, whether through cyber-attacks, malware, computer viruses, sabotage, or other significant disruption of our IT infrastructure and related systems. As such, there is a risk of a security breach or disruption of the systems we operate, including possible unauthorized access to our and our customers’ proprietary or classified information. We are also subject to breaches of our network resulting in unauthorized utilization of our services or products, which subject us to the costs of providing those products or services, which are likely not recoverable. The secure maintenance and transmission of our and our customer’s information is a critical element of our operations. Our information technology and other systems that maintain and transmit customer information, or those of service providers or business partners, may be compromised by a malicious third-party penetration of our network security, or that of a third party service provider or business partner, or impacted by advertent or inadvertent actions or inactions by our employees, or those of a third party service provider or business partner. As a result, our or our customers’ information may be lost, disclosed, accessed or taken without the customers’ consent, or our products and services may be used without payment.

Although we make significant efforts to maintain the security and integrity of these types of information and systems, there can be no assurance that our security efforts and measures will be effective or that attempted security breaches or disruptions would not be successful or damaging, especially in light of the growing sophistication of cyber-attacks and intrusions. We may be unable to anticipate all potential types of attacks or intrusions or to implement adequate security barriers or other preventative measures. Certain of our business units have been the subject of attempted and successful cyber-attacks in the past. We have researched the situations and do not believe any material internal or customer information has been compromised.

Network disruptions, security breaches and other significant failures of the above-described systems could (i) disrupt the proper functioning of our networks and systems and therefore our operations or those of certain of our customers; (ii) result in the unauthorized use of our services or products without payment, (iii) result in the unauthorized access to, and destruction, loss, theft, misappropriation or release of proprietary, confidential, sensitive or otherwise valuable information of ours or our customers, including trade secrets, which others could use to compete against us or for disruptive, destructive or otherwise harmful purposes and outcomes; (iv) require significant management attention or financial resources to remedy the damages that result or to change our systems and processes; (v) subject us to claims for contract breach, damages, credits, fines, penalties, termination or other remedies; or (vi) result in a loss of business, damage our reputation among our customers and the public generally, subject us to additional regulatory scrutiny or expose us to litigation. Any or all of which could have a negative impact on our results of operations, financial condition and cash flows.

We could fail to comply with requirements imposed on us by certain third parties, including regulators.

A significant and increasing portion of our telecom transactions are processed using credit cards and similar payment methods. The banks, credit card companies and other relevant parties impose strict system and other requirements to participate in such parties’ payment systems. We are required to comply with the privacy provisions of various federal and state privacy statutes and regulations, and the Payment Card Industry Data Security Standard, each of which is subject to change at any time. Compliance with these requirements is often difficult and costly, and our failure, or our distributors’ failure, to comply may result in significant fines or civil penalties, regulatory enforcement action, liability under or termination of necessary agreements related to our payment services business, each of which could have a material adverse effect on our financial position and/or operations and that of our distributors who could be liable as well. Further, our payment services are subject to stringent requirements by regulators and trade organizations in various jurisdictions. Our payment services unit is subject to federal and state banking regulations and we are also subject to further regulation by those states in which we are licensed as a money transmitter. We may not be able to comply with all such requirements in a timely manner or remain in compliance. If we are not in compliance, we could be subject to penalties or the termination of our rights to participate in such payment systems or provide such services, which could have a material negative impact on our ability to carry on and grow our Retail Communications and Payment Services operations.

RisksRisk Related to Our Financial Condition

We hold significant cash, cash equivalents, marketabledebt securities and equity investments that are subject to various market risks.

At July 31, 2017,2023, we had cash, cash equivalents, and marketable securities of $148.6 million. At July 31, 2017, we also had $8.6 million in investments in hedge funds, which were included in “Investments” in our consolidated balance sheet. Investments in marketabledebt securities, and hedge fundscurrent equity investments of $152.2 million. Debt securities and equity investments carry a degree of risk, as there can be no assurance that we can redeem the hedge fund investmentsthem at any time and that our investment managers will be able to accurately predict the course of price movements of securities and other instruments and, in general, the securities markets have in recent years been characterized by great volatility and unpredictability. As a result of these different market risks, our holdings of cash, cash equivalents, marketabledebt securities, and equity investments could be materially and adversely affected.

We plan on contributing a significant amountIf we fail to maintain an effective system of internal control over financial reporting, we may not be able to accurately report our cash, cash equivalentsfinancial results, and marketable securities to Rafael Holdings, Inc., which we expect to spin-off to our shareholders

At July 31, 2017, we had cash, cash equivalentscurrent and marketable securities of $148.6 million. Throughout fiscal 2017, we prepared to spin off additional non-core assets including our interests in two clinical and early stage pharmaceutical companies - Rafael Pharmaceuticals and Lipomedix Pharmaceuticals Ltd. - and our real estate holdings to our shareholders as Rafael Holdings, Inc. We intend to contribute $50 million to $60 million in cash to Rafael Holdings, Inc. prior to the spin-off, which would significantly reduce our cash, cash equivalents and marketable securities holdings. This reductionpotential stockholders may lose confidence in our cash, cash equivalents and marketable securities holdingsfinancial reporting which could have a negative effect on the trading price of our stock.

We are required by the Securities and Exchange Commission to establish and maintain adequate internal control over financial reporting that provides reasonable assurance regarding the reliability of our financial reporting and the preparation of financial statements in accordance with accounting principles generally accepted in the United States. We are likewise required, on a quarterly basis, to evaluate the effectiveness of our internal controls and to disclose any changes and material negativeweaknesses in those internal controls. A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of the company’s annual or interim financial statements will not be prevented or detected on a timely basis.

We cannot be certain that we will continue to maintain an effective system of internal control over our financial reporting in future periods. Any failure to maintain such internal controls could adversely impact on our ability to carryreport our financial results on a timely and growaccurate basis. If our businesses,financial statements are not accurate, investors may not have a complete understanding of our operations. Likewise, if our financial statements are not filed on a timely basis as required by the Securities and Exchange Commission and The New York Stock Exchange, we could face severe consequences from those authorities. In either case, there could be a material adverse effect on our business. Inferior internal controls could also cause investors to lose confidence in our reported financial information, which could result inhave a reductionnegative effect on the trading price of our business, financial condition and results of operations.stock.

Intellectual Property, Tax, Regulatory, and Litigation Risks

We provide communications and payment services to consumers and are therefore subject to various Federalfederal and state laws and regulations.

As a provider of communications and payment services to consumers, such as our BossBOSS Revolution international calling serviceCalling or our prepaid calling card services,BOSS Money, we are subject to various Federalfederal and state laws and regulations relating to the manner in which we advertise our services, describe and present the terms of our services, and communicate with our customers and consumers in general. Compliance with these laws requires us to be constantly vigilant as they often vary from state to state. Failure to comply with these laws could result in action being taken by Federalfederal and state agencies or offices responsible for consumer protection, like the Federal Trade Commission.Commission, or FTC, which could have a materially adverse effect on our results of operations, financial condition, revenues, and profits.

We may be adversely affected if we fail to protect our proprietary technology.

We depend on proprietary technology and other intellectual property rights in conducting our various business operations. We rely on a combination of patents, copyrights, trademarks and trade secret protection, and contractual rights to establish and protect our proprietary rights. Circumstances outside our control could pose a threat to our intellectual property rights. For example, effective intellectual property protection may not be available in every country in which our products and services are distributed. Also, the efforts we have taken to protect our proprietary rights may not be sufficient or effective enough. Any significant impairment of our intellectual property rights could harm our business or our ability to compete. Also, protecting our intellectual property rights is costly and time consuming. Any increase in the unauthorized use of our intellectual property could make it more expensive to do business and harm our operating results. Failure of our patents, copyrights, trademarks, and trade secret protection, non-disclosure agreements and other measures to provide protection of our technology and our intellectual property rights could enable our competitors to more effectively compete with us more effectively and have an adverse effect on our business, financial condition, and results of operations.

Rapid, significant, and disruptive technological changes impact the industries in which we operate, and we expect new services and technologies to continue to emerge and evolve. We cannot predict the effects of technological changes on our businesses. Developing and incorporating new technologies into our products and services may require significant investment, take considerable time, and ultimately may not be successful.

In addition, we may be required to litigate in the future to enforce our intellectual property rights, to protect our trade secrets, to determine the validity and scope of the proprietary rights of others, or to defend against claims of infringement or invalidity. Any such litigation could result in substantial costs and diversion of resources and could have a material adverse effect on our business, financial condition, or results of operations, and there can be no assurances that we will be successful in any such litigation.

We may be subject to claims of infringement of intellectual property rights of others.others, which could have a material adverse effect on our results of operations, financial condition, revenues, and profits.

Companies in the telecommunications industry and other industries in which we compete own large numbers of patents, copyrights and trademarks and frequently enter into litigation based on allegations of infringement or other violations of intellectual property rights. As we face increasing competition, the possibility of intellectual property claims against us grows. Although we do not believe that we infringe upon the intellectual property rights of others, our technologies may not be able to withstand any third-party claims or rights against their use. From time to time, we may be subject to claims and legal proceedings from third parties regarding alleged infringement by us of trademarks, copyrights, patents, and other intellectual property rights. Such suitslawsuits can be expensive and time consumingtime-consuming and could distract us and our management from focusing on our businesses. Further, the loss of such suitslawsuits could result in financial burdens and the requirement to modify our modes of operation, which could materially adversely affect our business.

We are subject to tax and regulatory audits which could result in the imposition of liabilities that may or may not have been reserved.

We are subject to audits by taxing and regulatory authorities with respect to certain of our income and operations. These audits can cover periods for several years prior to the date the audit is undertaken and could result in the imposition of liabilities, interest, and penalties if our positions are not accepted by the auditing entity.

Our FCC Form 499-A filings for calendar years 2000 through 2006 related to payments to the Universal Service Fund have been audited by the Internal Audit Division, or IAD, of the Universal Service Administrative Company, or USAC, which concluded that we incorrectly reported certain revenues on Forms 499-A. USAC’s revisions to our filing methodology resulted in additional regulatory payments for the years covered by the audits. While we believe in the accuracy of our filing methodology and our Request for Review remains pending, we have implemented some of the revisions set forth in the IAD’s filings beginning with our calendar year 2010 Form 499-A. We have accrued for all regulatory fees we believe may be incurred under IAD’s methodology from 2002 through the present, in the event our Request for Review is denied and/or our methodology is not upheld on appeal, and we have made certain payments on amounts that have been invoiced to us by USAC and/or other agencies. Our 2017 FCC Form 499-A, which reports our calendar year 2016 revenue is currently under auditwas audited by the IAD. AtUniversal Service Administrative Company, or 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. As of July 31, 2017,2023, our accrued expenses included $43.5$26.8 million for theseFCC-related regulatory fees for the yearsyear covered by the audit, as well as prior and subsequent years. Until a final decision has been reached in our disputes, we will continue to accrue in accordance with IAD’s methodology. If we do not properly calculate, or have not properly calculated, the amount payable by us to the Universal Service Fund,FCC, we may be subject to interest and penalties.

On September 20, 2016, we received a letter of inquiry from the Enforcement Bureau of the FCC requesting certain information and materials related to an investigation of potential violations by Straight Path Spectrum LLC (formerly a subsidiary of ours and currently a subsidiary of Straight Path) in connection with licenses to operate on the 28 GHz and 39 GHz bands of the Fixed Microwave Services. As disclosed in Straight Path’s filings with the SEC, Straight Path entered into a consent decree with the FCC that terminated the FCC’s related investigation against Straight Path. We have cooperated with the FCC in this matter and have responded to the letter of inquiry. If the FCC were to pursue separate action against us, the FCC could seek to fine or impose regulatory penalties or civil liability on us related to activities during the period of ownership by us.

We are subject to value added tax, or VAT, audits from time-to-time in various jurisdictions. In the conduct of such audits, we may be required to disclose information of a sensitive nature and, in general, to modify the way we have conducted business with our distributors until the present, which may affect our business in an adverse manner.

We are also subject to audits in various jurisdictions for various other taxes, including utility excise tax, sales and use tax, communications services tax, gross receipts tax, and property tax.

Our business is subject to strict regulation under federal law regarding anti-money laundering and anti-terrorist financing. Failure to comply with such laws, or abuse of our programs for purposes of money laundering or terrorist financing, could have a material adverse impact on our business.business, financial condition, and operating results.

Provisions of the USA PATRIOT Act, the Bank Secrecy Act and other federal laws impose substantial regulations on financial institutions that are designed to prevent money laundering and the financing of terrorist organizations. Increasing regulatory scrutiny of our industry with respect to money laundering and terrorist financing matters could result in more aggressive enforcement of these laws or the enactment of more onerous regulation, which could have a material adverse impact on our business. In addition, abuse of our money transfer services or prepaid card programs for purposes of money laundering or terrorist financing, notwithstanding our efforts to prevent such abuse through our regulatory compliance and risk management programs, could cause reputational or other harm that would have a material adverse impact on our business.business, financial condition, and operating results.

Our business is subject to a wide range of laws and regulations intended to help detect and prevent illegal or illicit activity and our failure, or the failure of one of our disbursement partners or payment processors to comply with those laws and regulations could harm our business, financial condition, and results of operations.operating results.

Our money transferBOSS Money and network branded prepaid card services are subject to a strict set of legal and regulatory requirements intended to help detect and prevent money laundering, terrorist financing, fraud, and other illicit activity. The interpretation of those requirements by judges, regulatory bodies and enforcement agencies is changing, often quickly and with little notice. Economic and trade sanctions programs that are administered by the U.S. Treasury Department’s Office of Foreign Assets Control, or OFAC, prohibit or restrict transactions to or from or dealings with specified countries, their governments, and in certain circumstances, with individuals and entities that are specially-designatedspecially designated nationals of those countries, narcotics traffickers and terrorists or terrorist organizations. As federal, state, and foreign legislative regulatory scrutiny and enforcement action in these areas increase, we expect our costs to comply with these requirements will increase, perhaps substantially. Failure to comply with any of these requirements by us, our regulated retailers or our disbursement partners could result in the suspension or revocation of a money transmitter license, the limitation, suspension or termination of our services, the seizure and/or forfeiture of our assets and/or the imposition of civil and criminal penalties, including fines.

Furthermore, failure by us or our agents to comply with applicable laws and regulations could also result in termination of contracts with our banks and/or merchant payment processors. Termination of services by one of our retail banks would seriously diminish our ability to collect funds from our BOSS Revolution agents. Likewise, termination of services by our merchant processor would negatively impact our ability to process payments in our digital channels.

The foregoing laws and regulations are constantly evolving, unclear, and inconsistent across various jurisdictions, making compliance challenging. If we fail to update our compliance system to reflect legislative or regulatory developments, we could incur penalties. New legislation, changes in laws or regulations, implementing rules and regulations, litigation, court rulings, changes in industry practices or standards, changes in systems rules or requirements or other similar events could expose us to increased compliance costs, liability, reputational damage, and could reduce the market value of our money transferBOSS Money and network branded prepaid card services or render them less profitable or obsolete.

The Dodd-Frank Act, as well as the regulations required by the Dodd-Frank Act and the Consumer Financial Protection Bureau could harm us and the scope of our activities, and could harm our operations, results of operations, and financial condition.

The Dodd-Frank Act, which became law in the United States on July 21, 2010, calls for significant structural reforms and substantive regulation across the financial services industry. In addition, the Dodd-Frank Act created the Consumer Financial Protection Bureau, or CFPB, whose purpose is to issue and enforce consumer protection initiatives governing financial products and services, including money transfer services.

We may be subject to examination by the CFPB, which has broad authority to enforce consumer financial laws. The CFPB has a large budget and staff and has broad authority with respect to our money transfer service and related business. It is authorized to collect fines and provide consumer restitution in the event of violations, engage in consumer financial education, track consumer complaints, request data, and promote the availability of financial services to underserved consumers and communities. In addition, the CFPB may adopt other regulations governing consumer financial services, including regulations defining unfair, deceptive, or abusive acts or practices, and new model disclosures. The CFPB’s authority to change regulations adopted in the past by other regulators, or to rescind or alter past regulatory guidance, could increase our compliance costs and litigation exposure.

The Dodd-Frank Act establishes a Financial Stability Oversight Counsel that is authorized to designate as “systemically important” non-bank financial companies and payment systems. Companies designated under either standard will become subject to new regulation and regulatory supervision. If we were designated under either standard, the additional regulatory and supervisory requirements could result in costly new compliance burdens or may require changes in the way we conduct business that could harm our business.business, financial condition, and operating results.

We are subject to licensing and other requirements imposed by U.S. state regulators, and the U.S. federal government. If we were found to be subject to or in violation of any laws or regulations governing money transmitters, we could lose our licenses, be subject to liability or be forced to change our business practices.practices, which could harm our business, results of operations, and financial condition.

A number of states and territories have enacted legislation regulating money transmitters, with 49 states requiring a license as of July 31, 2017.2023. At July 31, 2017,2023, we had obtained licenses to operate as a money transmitter in 4748 U.S. states and Washington, D.C. and Puerto Rico. We are also registered as money services businesses with the Financial Crimes Enforcement Network of the U.S. Department of the Treasury, or FinCEN. As a licensed money transmitter, we are subject to bonding requirements, liquidity requirements, restrictions on our investment of customer funds, reporting requirements, and inspection by state and foreign regulatory agencies. If we were found to be subject to and in violation of any banking or money services laws or regulations, we could be subject to liability or additional restrictions, such as increased liquidity requirements. In addition, our licenses could be revoked, or we could be forced to cease doing business or change our practices in certain states or jurisdictions or be required to obtain additional licenses or regulatory approvals that could impose a substantial cost on us. Regulators could also impose other regulatory orders and sanctions on us. Any change to our business practices that makes our service less attractive to customers or prohibits use of our services by residents of a particular jurisdiction could decrease our transaction volume and harm our business.business, financial condition, and operating results.

Our disbursement partners generally are regulated institutions in their home jurisdiction, and money transfers are regulated by governments in both the United States and in the jurisdiction of the recipient. If our disbursement partners fail to comply with applicable laws, it could harm our business.business, results of operations, and financial condition.

Money transfers are regulated by state, federal and foreign governments. Many of our disbursement partners are banks that are heavily regulated by their home jurisdictions. Our non-bank disbursement partners are also subject to money transfer regulations. We require regulatory compliance as a condition to our continued relationship, perform due diligence on our disbursement partners, and monitor them periodically with the goal of meeting regulatory expectations. However, there are limits to the extent to which we can monitor their regulatory compliance. Any determination that our disbursement partners or their sub-disbursement partners have violated laws and regulations could seriously damage our reputation, resulting in diminished revenue and profit and increased operating costs. While our services are not directly regulated by governments outside the United States, except with respect to IDT Financial Services Limited, or IDTFS, our GibraltarGibraltar-based bank as discussed below, it is possible that in some cases we could be liable for the failure of our disbursement partners or their sub-disbursement partners to comply with laws, which also could harm our business, financial condition, and results of operations.

Our bank in GibraltarIDTFS is regulated by the Gibraltar Financial Services Commission, (the FSC),or FSC, and, as such, is subject to Gibraltarian and European UnionEU laws relating to financial institutions. As an issuer of prepaid debit cards for programs operated by other entities, commonly known as program managers, the bankIDTFS is responsible, inter alia, for anti-money laundering laws oversight and compliance. If we were to fail to implement the requisite controls or follow the rules and procedures mandated by the FSC and applicable law, we could be subject to regulatory fines, and even the loss of our banking license. In fiscal 2016, a referendum took place in the United Kingdom in which a majority voted in favor of the United Kingdom’s exit from the European Union – commonly referred to as “Brexit”. As a bank licensed in Europe, our bank in Gibraltar currently benefits from its ability to passport its license to operate in any European Union member state. However, as a British territory, if Brexit occurs, and no alternative arrangements are established with respect to licensing of British banks in the European Union, our bank in Gibraltar may not be able to passport its license into European Union member states.In 2017, we entered into an agreement to sell our Gibraltar-based bank for approximately $18 million, which we expect to close in calendar 2017.

We receive, store, process, and use personal information and other data, which subjects us to governmental regulation and other legal obligations related to privacy. Our actual or perceived failure to comply with such obligations could harm our business.business, financial condition, and results of operations.

We receive, store, and process personal information and other customer data, including bank account numbers, credit and debit card information, identification numbers, and images of government identification cards. As a result, we are required to comply with the privacy provisions of the Gramm-Leach-Bliley Act of 1999, or the Gramm-Leach-Bliley Act, and the Payment Card Industry Data Security Standard.Standard, or PCI DSS. There are also numerous other federal, state, local, and localinternational laws, aroundsuch as the worldCalifornia Consumer Privacy Act, or CCPA and the EU’s General Data Protection Regulation, or GDPR, regarding privacy and the storing, sharing, use, processing, disclosure, and protection of personal information and other customer data, the scope of which are changing, subject to differing interpretations, and may be inconsistent among different jurisdictions or conflict with other applicable rules. It is possible that these obligations may be interpreted and applied in a manner that is inconsistent from one jurisdiction to another and may conflict with other rules or our business practices.

Additionally, with advances in computer capabilities and data protection requirements to address ongoing threats, we may be required to expend significant capital and other resources to protect against potential security breaches or to alleviate problems caused by security breaches.

Any failure or perceived failure by us to comply with our privacy policies, our privacy-related obligations to customers or other third parties, or our privacy-related legal obligations, or any compromise of security that results in the unauthorized release or transfer of personally identifiable information or other customer data, may result in governmental enforcement actions, fines, or litigation. If there is a breach of credit or debit card information that we store, we could also be liable to the issuing banks for their cost of issuing new cards and related expenses. In addition, a significant breach could result in our being prohibited from processing transactions for any of the relevant network organizations, such as Visa or MasterCard, which would harm our business. If any third parties with whom we work, such as marketing partners, vendors, or developers, violate applicable laws or our policies, such violations may put our customers’ information at risk and could harm our business. Any negative publicity arising out of a data breach or failure to comply with applicable privacy requirements could damage our reputation and cause our customers to lose trust in us, which could harm our business, results of operations, financial position, and potential for growth.

We may be harmed by certain imminent FCC Orders and rules that effect the telecommunications marketplace.

In the Telephone Robocall Abuse Criminal Enforcement and Deterrence, or TRACED, Act, Congress gave the FCC new tools to fight unwanted, and often illegal, robocalls, the top consumer complaint reported to the FCC annually. The TRACED Act required the FCC to mandate the STIR/SHAKEN caller identification framework. STIR/SHAKEN enables phone companies to verify that the caller ID information transmitted with a call matches the caller’s real phone number. The FCC has issued a series of Orders and adopted several rules to implement the TRACED Act. For example, by June 30, 2021, many domestic and foreign carriers were required to register with the FCC specifically for TRACED Act compliance. Initially, the FCC concluded that by September 28, 2021, we and other similarly situated carriers would not be able to accept certain IP-based telecommunications traffic from foreign and domestic carrier partners unless those carriers were registered with the FCC. However, the FCC temporarily suspended this obligation while it reconsiders its impact. We believe the FCC will eventually reinstate the rule or implement a new rule that will have a comparable impact upon us and the industry as a whole. We also believe the FCC will continue to address and refine its rules in this area. Of equal importance, carriers such as us have the right to “sign” their traffic, effectively attesting that the traffic they are transmitting is not illegal robocalls.

The FCC’s rules present several concerns to all carriers. Notably, the rules extend to many foreign carriers, and it is unclear whether foreign carriers will be sufficiently educated and experienced to implement U.S. rules and regulations. Foreign carrier compliance, or the lack thereof, could impact U.S. carriers as they seek to meet their own regulatory obligations. There may also be changes in the marketplace as foreign carriers may look to limit U.S. carrier partners to whom they transmit calls for termination in the U.S. that are subject to the STIR/SHAKEN rules.

In Canada, the Canadian Radio-Television and Telecommunications Commission, or CRTC is implementing near-identical STIR/SHAKEN rules as the FCC is implementing in the U.S. although it is not apparent whether the CRTC will punish service providers who fail to meet their obligations with the zealousness of the FCC. We expect that additional national communications regulators will implement similar, if not identical, STIR/SHAKEN legislation.

We anticipate meeting our regulatory obligations under the STIR/SHAKEN rules and we are undertaking efforts to prevent us from being harmed by potential changes in the marketplace. Nevertheless, the FCC’s rules allow for the possibility that well-prepared carriers with anti-robocalling procedures in place may fail and be punished for their failure, despite their best efforts. Moreover, because the STIR/SHAKEN rules may have a significant impact on the telecommunications marketplace, it is difficult to predict their outcome. We are prepared for the implementation of STIR/SHAKEN but are concerned about its impact on the market as a whole and on us specifically.

Federal and state regulations may be passed that could harm our business.business, financial condition, and results of operations.

Our ability to provide VoIP communications services at attractive rates arises in large part from the fact that VoIP services are not currently subject to the same level of regulation as traditional, switch-based telephony. The use of the Internet and private IP networks to provide voice communications services is largely unregulated within the United States, although several foreign governments have adopted laws and/or regulations that could restrict or prohibit the provision of voice communications services over the Internet or private IP networks. In the United States, the California PUC has initiated a proceeding under which we believe the PUC will expand its authority to regulate interconnected VOIP. Other states are expected to follow the California PUC’s lead. If interconnected VoIP services become subject to state regulation and/or additional regulation by the FCC, such regulation will likely lead to higher costs and reduce or eliminate the competitive advantage interconnected VoIP holds over traditional telecommunications services by virtue of its lesser regulatory oversight, over traditional telecommunications services.oversight. More aggressive regulation of the Internet in general, and Internet telephony providers and services specifically, may materially and adversely affect our business, financial condition, and results of operations.

Our ability to offer services outside of the United States is subject to the local regulatory environment, which may be unfavorable, complicated, and often uncertain.

Regulatory treatment outside the United States varies from country to country. We distribute our products and services through resellers that may be subject to telecommunications regulations in their home countries. The failure of these resellers to comply with these laws and regulations could reduce our revenue and profitability or expose us to audits and other regulatory proceedings. Regulatory developments such as these could have a material adverse effect on our operating results.

In many countries in which we operate, or our services are sold, the status of the laws that may relate to our services is unclear. We cannot be certain that our customers, resellers, or other affiliates are currently in compliance with regulatory or other legal requirements in their respective countries, that they or we will be able to comply with existing or future requirements, and/or that they or we will continue in compliance with any requirements. Our failure or the failure of those with whom we transact business to comply with these requirements could materially adversely affect our business, financial condition, and results of operations.

While we expect additional regulation of our industry in some or all of these areas, and we expect continuing changes in the regulatory environment as new and proposed regulations are reviewed, revised and amended, we cannot predict with certainty what impact new laws in these areas will have on us, if any. For a complete discussion of what we believe are the most material regulations impacting our business, see Item 1 to Part I “Business-Regulation” included elsewhere in this Annual Report.

net2phone’s VoIP services are subject to regulation in the United States and Canada. Future legislative, regulatory, or judicial actions could adversely affect net2phone’s business and expose it to liability and limit its growth potential.

The United States and Canada have applied some traditional telephone company regulations to VoIP and continue to evaluate how VoIP should be regulated, as are other countries as we expand globally. The effects of future regulatory developments are uncertain. At the federal level in the United States, the FCC has imposed certain telecommunications regulations on VoIP services including, but not limited to:

In Canada, the CRTC regulates VoIP Service. These regulated services are similar to those regulated in the United States discussed above. We are subject to a variety of other federal, state and international laws and regulations as well as oversight from a variety of governmental agencies and public service commissions. The laws governing our business may change in ways that harm our business. Federal, state, or international governmental agencies administering and enforcing such laws may also choose to interpret and apply them in ways that harm our business. These interpretations are also subject to change. Regulatory action could materially impair or force us to change our business model and may adversely affect our revenue, increase our compliance costs, and reduce our profitability. In addition, governmental agencies such as the Securities and Exchange Commission, Internal Revenue Service, FTC, FCC, and state taxing authorities may conclude that we have violated federal laws, state laws or other rules and regulations, and we could be subject to fines, penalties or other actions that could adversely impact our financial results or our ability to conduct business.

We are subject to legal proceedings in the ordinary course of business that may have a material adverse effect on our business, results of operations, cash flows, or financial condition.

Various legal proceedings that have arisen or may arise in the ordinary course of business have not been finally adjudicated, which may have a material adverse effect on our results of operations, cash flows, or financial condition.condition (see Note 23 to our Consolidated Financial Statements in Item 8 to Part II of this Annual Report).

In particular, on July 5, 2017, plaintiff JDS1, LLC, on behalf of itself and all other similarly situated stockholders of Straight Path, and derivatively on behalf of Straight Path as nominal defendant, filed a putative class action and derivative complaint in the Delaware Chancery Court against us, The Patrick Henry Trust (a trust formed by Howard S. JonasOur telecommunications services are required to hold record and beneficial ownership of all of his shares of Straight Path), Howard S. Jonas, and each of Straight Path’s directors. The complaint alleges that we aided and abetted Straight Path’s directors and Howard S. Jonas in his capacity as controlling stockholder of Straight Path, in breaching their fiduciary duties to Straight Path in connectioncomply with the settlement of claims between Straight Path and us related to potential indemnification claims concerning Straight Path’s obligations under the Consent Decree it entered into with theindustry standards, FCC regulations, privacy laws as well as the proposed sale of Straight Path’s subsidiary Straight Path IP Group, Inc.certain state and local jurisdiction specific regulations. Failure to comply with existing laws and any new laws that may become applicable to us may subject us to penalties, increase our operation costs, and may also require us to modify existing products and/or service.

The acceptance of telecommunications services is dependent upon our meeting certain industry standards. We are required to comply with certain rules and regulations of the FCC regarding safety standards. Standards are continuously being modified and replaced. As standards evolve, we may be required to modify our existing products or develop and support new versions of our products. We must comply with certain federal, state, and local requirements regarding how we interact with our customers, including marketing practices, consumer protection, privacy, and billing issues, the provision of emergency 911 service, and the quality of service we provide to our customers. The failure of our products and services to comply, or delays in connectioncompliance with various existing and evolving standards could delay future offerings and impact our revenues and profitability. Changes to the Universal Service Fund by the FCC or various state Universal Service Funds may require us to increase our costs which could negatively affect revenue and profitability.

We are subject to Federal laws and FCC regulations that settlement. Thatrequire us to protect customer information. While we have protections in place to protect customer information there is no assurance that our systems will not be subject to failure or intentional fraudulent attack. The failure to protect required information could subject us to penalties and diminish the confidence our customers have in our systems, which could negatively affect results. While we try to comply with all applicable data protection laws, regulations, standards, and codes of conduct, as well as our own posted privacy policies and contractual commitments to the extent possible, any failure by us to protect our customers’ privacy and data, including as a result of our systems being compromised by hacking or other malicious or surreptitious activity, could result in a loss of customer confidence in our services and ultimately in a loss of customers, which could materially and adversely affect our business as well as subject us to law suits, civil fines and criminal penalties.

Governmental entities, class action was consolidatedlawyers, and consumer advocates are reviewing the data collection and use by companies that must maintain such data. Our own requirements as well as regulatory codes of conduct, enforcement actions by regulatory agencies, and lawsuits by other parties could impose additional compliance costs on us as well as subject us to unknown potential liabilities. These evolving laws, rules, and practices may also curtail our current business activities, which may delay or affect our ability to become profitable as well as affect customers and other business opportunities.

In addition, several foreign countries and governmental bodies, including the EU, Brazil, and Canada, have laws and regulations concerning the collection and use of personally identifiable information obtained from their residents, including payment card information, which are often more restrictive than those in the U.S. Laws and regulations in these jurisdictions apply broadly to the collection, use, storage, disclosure, and security of personally identifiable information, including payment card information identifying, or which may be used to identify, an individual, such as names, email addresses, and, in some jurisdictions, IP addresses, device identifiers, and other data. As we conduct business or become deemed to conduct business in foreign jurisdictions, including through websites that we host that may be available in these locations, we may become subject to those laws and regulations.

We are also subject to privacy and data protection-related obligations in our contracts with our customers and other third parties. Any failure, or perceived failure, to comply with federal, state, or international laws, or to comply with our contractual obligations related to privacy, could result in proceedings or actions against us which could result in significant liability to us as well as harm to our reputation. Additionally, third parties with whom we contract may violate or appear to violate laws or regulations which could subject us to the same risks. Any new laws, regulations, other legal obligations or industry standards, or any changed interpretation of existing laws, regulations or other standards may require us to incur additional costs and restrict our business operations.

Our collection, processing, storage, use, and transmission of personal data could give rise to liabilities because of governmental regulation, conflicting legal requirements, differing views on data privacy, or security breaches.

We engage in electronic billing and processing of our customers using secure transmission of sometimes confidential information over public networks. We have systems and processes in place that are designed to protect consumer information and prevent fraudulent credit card transactions and other security breaches. However, there is no guarantee that such systems and processes will not experience a similarfailure. Our failure to protect against fraud or breaches may subject us to costly breach notification and other mitigation obligations, class action lawsuits, investigations, fines, forfeitures, or penalties from governmental agencies that was initiatedcould adversely affect our operating results. We may be unable to prevent our customers from fraudulently receiving goods and services. Personal data is increasingly subject to legal and regulatory protections around the world, which vary widely in approach and which possibly conflict with one another. In recent years, for example, U.S. legislators and regulatory agencies, such as the FTC, as well as U.S. states have increased their focus on protecting personal data by law and regulation and have increased enforcement actions for violations of privacy and data protection requirements. The Arbitrage Fund. The Plaintiffs are seeking,CCPA requires, among other things, (i)covered companies to provide new disclosures to California consumers, and afford such consumers new abilities to opt-out of certain sales of personal information. While we believe that we are not a declarationcovered entity under the law, the effects of the CCPA potentially are significant, and may require us to modify our data processing practices and policies and to incur substantial costs and expenses in an effort to comply. We may also from time to time be subject to, or face assertions that we are subject to, additional obligations relating to personal data by contract or due to assertions that self-regulatory obligations or industry standards apply to our practices.

We may also experience losses due to customer fraud and theft of service, such as fraudulent credit card transactions. Customers have, in the past, obtained access to our service without paying for monthly service and international toll calls by unlawfully using fraudulently obtained codes. If our existing anti-fraud procedures are not adequate or effective, consumer fraud and theft of service could have a material adverse effect on our business, financial condition, and operating results.

The GDPR and the Data Protection Act in the United Kingdom are intended to protect the privacy and security of personal data, including credit card information that is collected, processed, and transmitted in or from the relevant jurisdiction. We stopped hosting websites in GDPR-complaint countries or countries from which the bulk of business came from countries subject to GDPR. We also took steps to block those countries from accessing any other sites we host. While we do not currently provide services in countries where compliance would be required and are therefore not required to be compliant, if we did provide those services or otherwise were required to become complaint, implementation of and compliance with these laws and regulations may be more costly or take longer than we anticipate, or could otherwise adversely affect our business operations, which could negatively impact our financial position or cash flows.

Additionally, media coverage of data breaches has escalated, in part because of the increased number of enforcement actions, investigations, and lawsuits. As this focus and attention on privacy and data protection increases, we also risk exposure to potential liabilities and costs resulting from compliance with or any failure to comply with applicable legal requirements, conflicts among these legal requirements, or differences in approaches to privacy.

We could fail to comply with requirements for debit card, credit card, and other digital payment methods, which could have a material adverse effect on our revenues, results of operations, and financial condition.

A significant and increasing portion of our transactions are processed using debit cards, credit cards, and other digital payment methods. The banks, credit card companies, networks, and other payment processing providers impose strict regulatory, compliance, system, and other requirements to participate in such parties’ payment systems. We are required to comply with the privacy provisions of various federal and state privacy statutes and regulations, and the PCI DSS, each of which is subject to change at any time. Compliance with PCI DSS does not guarantee a completely secure environment and notwithstanding the results of this assessment there can be no assurance that payment card brands will not request further compliance assessments or set forth additional requirements to maintain access to credit card processing services. Compliance with PCI DSS is an ongoing effort, and the requirements evolve as new threats are identified. Compliance with these requirements is often difficult and costly, and our failure, or our counterparty’s failure, to comply may result in significant fines or civil penalties, regulatory enforcement action, or liability under or termination of necessary agreements, each of which could have a material adverse effect on our financial position and/or operations and that of our distributors who could be liable as well.

Further, our payment services are subject to stringent requirements by regulators and trade organizations in various jurisdictions. Our payment services unit is subject to federal and state banking regulations, and we are also subject to further regulation by those states in which we are licensed as a money transmitter. We may not be able to comply with all such requirements in a timely manner or remain in compliance. If we are not in compliance, we could be subject to penalties or the termination of our rights to participate in such payment systems or provide such services, which could have a material negative impact on our ability to grow our businesses and our revenues and profits.

We face risks in our sales to certain market segments including, but not limited to, sales subject to HIPAA Regulations.

Our customers can use our services to store contact and other personal or identifying information, and to process, transmit, receive, store, and retrieve a variety of communications and messages, including information about their own customers and other contacts. In addition, customers may use our services to store protected health information, or PHI, that is protected under the Health Insurance Portability and Accountability Act, or HIPAA. We have sold and will continue to attempt to sell to certain customer segments which may have requirements for additional privacy or security. In addition, sales may be made to customers that are subject to additional security requirements. Selling into segments with additional requirements increases potential liability that in some instances may be unlimited. While we believe we meet or exceed all requirements for sales to such segments, there is no assurance that our systems fully comply with all requirements. Noncompliance with laws and regulations relating to privacy and HIPAA may lead to significant fines, penalties, or civil liability.

Our ability to offer services outside the United States is subject to different regulations which may be unknown and uncertain.

Regulatory treatment of VoIP providers outside the United States varies from country to country, and local jurisdictions. Many times, the laws are vague, unclear and regulations are not enforced uniformly. We are licensed as a VoIP seller in our international markets and are considering expanding to other countries. We also cannot control if our customers take their devices out of the United States and use them abroad. Our resellers may sell to customers who maintain facilities outside the United States. The failure by us or our customers and resellers to comply with laws and regulations could reduce our revenue and profitability. As we expand to additional countries there may be additional regulations that we are required to comply with, the failure to comply or properly assess regulations may subject us to penalties, fines, and other actions that could materially affect our business.

Examinations by relevant tax authorities may result in material changes in related tax reserves for tax positions taken in previously filed tax returns or may impact the valuation of certain deferred income tax assets, such as net operating loss carry-forwards.

Based on the outcome of examinations by relevant tax authorities, or because of the expiration of statutes of limitations for specific jurisdictions, it is reasonably possible that the actionrelated tax reserves for tax positions taken regarding previously filed tax returns will materially change from those recorded in our financial statements. In addition, the outcome of examinations may impact the valuation of certain deferred income tax assets (such as net operating loss carry-forwards) in future periods. It is not possible to estimate the impact of the amount of such changes, if any, on previously recorded uncertain tax positions.

There may be maintaineda negative effect on our business going forward because of changes to net neutrality.

The principle that Internet service providers should treat all Internet communications equally, and not charge users different rates for various tiers of service or prioritize certain traffic while blocking or slowing down others, is called net neutrality. On January 4, 2018, the FCC released an order that largely repealed prior FCC rules that prevented broadband internet access providers from degrading or otherwise disrupting a broad range of services provisioned over consumers’ and enterprises’ broadband internet access lines. Many of the largest providers of broadband services, like cable companies and traditional telephone companies, have publicly stated that they will not degrade or disrupt their customers’ use of applications and services, like ours. However, there was no guarantee that they would not do so in the future. If such providers were to degrade, impair, or block our services, it would negatively impact our ability to provide services to our customers, and we would likely lose revenue and profits. We would probably incur legal fees in an attempt to restore our customers’ access to our services. Broadband internet access providers may also attempt to charge us or our customers additional fees to access services like ours that may result in the loss of customers and revenue, or increase our costs thereby reducing our profitability, or make our services less competitive if we increase our rates to our customers. President Biden and numerous Senators have criticized the status of net neutrality, at this time we are not aware if there will be legislation that might reimpose the prior regulations.

Following the adoption of the January 4, 2018 order, a number of states passed laws establishing rules similar to those that existed prior to the effective date of the January 4, 2018 order. However, we cannot rely on those state laws because of the uncertainty as a class actionto whether states have the authority to establish rules that could be interpreted to conflict with the January 4, 2018 order. The U.S. Department of Justice has taken the position that local authorities do not have the authority to contradict the FCC’s January 4, 2018 order. We cannot predict the ultimate outcome of these disputes.

States are adding regulation for VoIP providers which could increase our costs and change certain aspects of our service.

Certain states take the position that offerings by VoIP providers may include intrastate communications and should therefore be subject to state regulation including state taxes or surcharges. We have registered as an interconnected VoIP provider in those states where registration is required; however, our rates are not regulated in the same manner as traditional telephone service providers. We believe that the FCC has pre-empted states from regulating VoIP providers in the same manner as providers of traditional telecommunications services. We cannot predict how this issue will be resolved or its impact on our business at this time.

Taxing authorities may successfully assert that we should have collected or in the alternative,future should collect sales and use, value added, or similar taxes, and any such assessments could adversely affect our business, financial condition, and results of operations.

Jurisdictions in which we do not collect sales, use, value added, or similar taxes on VoIP services or other products may assert that demand on the Straight Path Board is excused; (ii) that the term sheet is invalid; (iii) awarding damages for the unfair price stockholderssuch taxes are receivingapplicable, which could result in tax assessments, penalties, and interest, and we may be required to collect such taxes in the merger between Straight Pathfuture. Such tax assessments, penalties, interest, or future requirements could adversely affect our financial condition and Verizon Communicationsresults of operations. Further, in June 2018, the Supreme Court held in South Dakota v. Wayfair, Inc. that states could impose sales tax collection obligations on out-of-state sellers even if those sellers lack any physical presence within the states imposing the sales taxes. Under Wayfair, a person requires only a “substantial nexus” with the taxing state before the state may subject the person to sales tax collection obligations therein. An increasing number of states (both before and after the publication of Wayfair) have considered or adopted laws that attempt to impose sales tax collection obligations on out-of-state sellers. The Supreme Court’s Wayfair decision has removed a significant impediment to the enactment and enforcement of these laws, and it is possible that states may seek to tax out-of-state sellers on sales that occurred in prior tax years, which could create additional administrative burdens for their sharesus, put us at a competitive disadvantage if such states do not impose similar obligations on our competitors, and decrease our future sales, which would adversely impact our business, financial condition, and results of Straight Path’s Class B common stock; and (iv) ordering Howard S. Jonas, Davidi Jonas, the Chairman of the Board and Chief Executive Officer of Straight Path, and us to disgorge any profits for the benefit of the class Plaintiffs. On August 28, 2017, the Plaintiffs filed an amended complaint. On September 24, 2017, the Company filed a motion to dismiss the amended complaint. We intend to vigorously defend the action.operations.

Risks Related to Our Capital Structure

Holders of our Class B common stock have significantly less voting power than holders of our Class A common stock.

Holders of our Class B common stock are entitled to one-tenth of a vote per share on all matters on which our stockholders are entitled to vote, while holders of our Class A common stock are entitled to three votes per share. As a result, the ability of holders of our Class B common stock to influence our management is limited.

We are controlled byEight trusts for the benefit of sons and daughters of Howard S. Jonas, our principal stockholder,Chairman and Chairman of the Board, hold shares that, in the aggregate, represent more than a majority of the combined voting power of our outstanding capital stock, which limitsmay limit the ability of other stockholders to affect our management.

Howard S. Jonas serves as our Chairman, which is an executive officer position, and our Chairman of the Board, and founder, haswhich is a Board of Directors position. As of October 11, 2023, eight trusts for the benefit of children of Howard S. Jonas (the “Trusts”), collectively have voting power over 4,279,503 shares of our common stock (which includes 1,574,326 shares of our Class A common stock, (which is all the issued and outstanding shares of the Class A common stock), which are convertible into shares of our Class B common stock on a 1-for-1 basis, and 2,705,1772,382,371 shares of our Class B common stock),stock, representing approximately 70.8%70% of the combined voting power of our outstanding capital stock, as of October 10, 2017.11, 2023. Each of the Trusts has a different, independent trustee. In addition, Mr. Jonasas of October 11, 2023, The HSJ Remainder 2019 Trust holds an option to purchase 1,000,0001,811,711 shares of our Class B common stock whichand The HSJ 2022 Annuity Trust holds 78,016 shares of our Class B common stock. Both of these trusts have an independent trustee.

Howard S. Jonas does not have the right to direct or control the voting of the shares of our common stock that is fully vestedheld by the Trusts, and exercisable. Mr.the independent trustees hold sole voting and dispositive power over the common stock held by the Trusts. However, he is the trustor of the trusts and is the father of each of the beneficiaries of the Trusts and his views may be taken into account by the trustees and others related to the Trusts. In addition, he is our founder and has served as an executive officer, including our Chief Executive Officer, for a very significant time period. The members of the Board and management often look to him for guidance on major financial, operational, and strategic matters.

We are not aware of any voting agreement between or among any of the Trusts and/or Howard S. Jonas, isbut if such a voting agreement or other similar arrangement exists or were to be consummated, if all or several of the Trusts were to act in concert, or if we issued additional Class A common stock, certain or all of the Trusts and/or Howard S. Jonas along with holders of the Class A common stock would be able to control matters requiring approval by our stockholders, including the election of all of the directors, amendment of organizational documents, and the approval of significant corporate matters,transactions, including any merger, consolidation or sale of all or substantially all of our assets. As a result, the ability of any of our other stockholders to influence our management ismay be limited. In addition, our dual class structure has an anti-takeover effect, and accordingly, the holders of the shares of Class A common stock can prevent any change in control transactions that may otherwise be in the best interest of stockholders.

Item 1B. Unresolved Staff Comments.

None.

None.

Item 2. Properties.

Our headquarters is located in a building that we own in Newark, New Jersey. The building isWe lease approximately 496,00080,000 square feet. We occupy approximately 20%feet of office space plus a portion of the building. We also own an 800-car public parking garage located across the street from the building.

In addition, we own a building We also lease approximately 3,600 square feet of office space in Piscataway, New JerseyJerusalem, Israel that is used partiallyowned by IDT Telecom for certain of its operationsRafael Holdings. The Newark lease expires in April 2025 and a 12,400 square foot condominium interestthe Israel lease expires in a building in Jerusalem, Israel.July 2025.

We lease space in New York, New York for corporate purposes as well as a number of other locations in metropolitan areas. These leased spaces are utilized primarily to house telecommunications equipment and retail operations.

We maintain our European headquarters in London, England. We also maintain other various international office locations and telecommunications facilities in regions of Europe, South America, CentralLatin America, the Middle East, Asia, and Africa where we conduct operations.

Item 3. Legal Proceedings.

On May 5, 2004, we filed a complaint

Legal proceedings disclosure is presented in the Supreme CourtNote 23 to our Consolidated Financial Statements in Item 8 to Part II of the State of New York, County of New York, seeking injunctive relief and damages against Tyco Group, S.A.R.L., Tyco Telecommunications (US) Inc. (f/k/a TyCom (US) Inc.), Tyco International, Ltd., Tyco International (US) Inc., and TyCom Ltd. (collectively “Tyco”). We alleged that Tyco breached a settlement agreement that it had entered into with us to resolve certain disputes and civil actions among the parties. We alleged that Tyco did not provide us, as required under the settlement agreement, free of charge and for our exclusive use, a 15-year indefeasible right to use four Wavelengths in Ring Configuration (as defined in the settlement agreement) on a global undersea fiber optic network that Tyco was deploying at that time. After extensive proceedings, including several decisions and appeals, the New York Court of Appeals affirmed a lower court decision to dismiss our claim and denied our motion for re-argument of that decision. On June 23, 2015, we filed a new summons and complaint against Tyco in the Supreme Court of the State of New York, County of New York alleging that Tyco breached the settlement agreement. In September 2015, Tyco filed a motion to dismiss the complaint, which we opposed. Oral argument was held on March 9, 2016. On October 17, 2016, the judge granted Tyco’s motion and dismissed the complaint. In August 2017, we filed an appeal, which Tyco opposed.this Annual Report.

On July 5, 2017, plaintiff JDS1, LLC, on behalf of itself and all other similarly situated stockholders of Straight Path, and derivatively on behalf of Straight Path as nominal defendant, filed a putative class action and derivative complaint in the Delaware Chancery Court against us, The Patrick Henry Trust (a trust formed by Howard S. Jonas to hold record and beneficial ownership of all of his shares of Straight Path), Howard S. Jonas, and each of Straight Path’s directors. The complaint alleges that we aided and abetted Straight Path’s directors and Howard S. Jonas in his capacity as controlling stockholder of Straight Path, in breaching their fiduciary duties to Straight Path in connection with the settlement of claims between Straight Path and us related to potential indemnification claims concerning Straight Path’s obligations under the Consent Decree it entered into with the FCC, as well as the proposed sale of Straight Path’s subsidiary Straight Path IP Group, Inc. to us in connection with that settlement. That action was consolidated with a similar action that was initiated by The Arbitrage Fund. The Plaintiffs are seeking, among other things, (i) a declaration that the action may be maintained as a class action or in the alternative, that demand on the Straight Path Board is excused; (ii) that the term sheet is invalid; (iii) awarding damages for the unfair price stockholders are receiving in the merger between Straight Path and Verizon Communications Inc. for their shares of Straight Path’s Class B common stock; and (iv) ordering Howard S. Jonas, Davidi Jonas, the Chairman of the Board and Chief Executive Officer of Straight Path, and us to disgorge any profits for the benefit of the class Plaintiffs. On August 28, 2017, the Plaintiffs filed an amended complaint. On September 24, 2017, the Company filed a motion to dismiss the amended complaint. We intend to vigorously defend the action.

In addition to the foregoing, we are subject to other legal proceedings that have arisen in the ordinary course of business and have not been finally adjudicated. Although there can be no assurance in this regard, we believe that none of the other legal proceedings to which we are a party will have a material adverse effect on our results of operations, cash flows or financial condition.

Item 4. Mine Safety Disclosures.

Not applicable.

Part II

Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities.

PRICE RANGE OF COMMON STOCK

Our Class B common stock trades on the New York Stock Exchange under the symbol “IDT.”

The table below sets forth the high and low sales prices for our Class B common stock as reported by the New York Stock Exchange for the fiscal periods indicated.

On October 9, 2017,11, 2023, there were 363271 holders of record of our Class B common stock and 1 holdereight holders of record of our Class A common stock. All shares of Class A common stock are beneficially owned by eight trusts for the benefit of children of Howard Jonas.S. Jonas, our Chairman and the Chairman of the Board. The number of holders of record of our Class B common stock does not include the number of persons whose shares are in nominee or in “street name” accounts through brokers. On October 10, 2017,11, 2023, the last sales price reported on the New York Stock Exchange for the Class B common stock was $13.42$27.37 per share.

Additional information regardingIn fiscal 2018, our Board of Directors discontinued our quarterly dividend, electing instead to repurchase shares of our Class B common stock when warranted by market conditions, available resources, and our business outlook and results, as well as to invest in our growth business initiatives. Accordingly, no dividends required by this item is incorporated by reference from the Management’s Discussion and Analysis section foundwere paid in Item 7 and from Note 18 to the Consolidated Financial Statements.fiscal 2023 or fiscal 2022.

The information required by Item 201(d) of Regulation S-K will be contained in our Proxy Statement for our Annual Stockholders Meeting, which we will file with the Securities and Exchange Commission within 120 days after July 31, 2017,2023, and which is incorporated by reference herein.

Performance Graph of Stock

The line graph below compares the cumulative total stockholder return on our Class B common stock with the cumulative total return of the New York Stock Exchange Composite Index and the Standard & Poor’s Telecommunication Services Index for the five years ended July 31, 2017. The graph and table assume that $100 was invested on July 31, 2012 (the last day of trading for the fiscal year ended July 31, 2012) in shares of our Class B common stock, and that all dividends were reinvested. Cumulative total return for our Class B common stock includes the value of spin-offs consummated by IDT (i.e., pro rata distributions of the common stock of a subsidiary to our stockholders). Cumulative total stockholder returns for our Class B common stock, the NYSE Composite Index and the S&P Telecommunication Services Index are based on our fiscal year.

Issuer Purchases of Equity Securities

The following table provides information with respect to purchases by us of our shares during the fourth quarter of fiscal 2017.2023.