IDT CORPORATION This Annual Report contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934, including statements that contain the words "believes," "anticipates," "expects," "plans," "intends" and similar words and phrases. These forward-looking statements are subject to risks and uncertainties that could cause actual results to differ materially from the results projected in any forward-looking statement. In addition to the factors specifically noted in the forward-looking statements, other important factors, risks and uncertainties that could result in those differences include, but are not limited to, those discussed under Item 1A to Part I "Risk Factors" in this Annual Report. The forward-looking statements are made as of the date of this Annual Report, and we assume no obligation to update the forward-looking statements, or to update the reasons why actual results could differ from those projected in the forward-looking statements. Investors should consult all of the information set forth in this report and the other information set forth from time to time in our reports filed with theSecurities and Exchange Commission pursuant to the Securities Act of 1933 and the Securities Exchange Act of 1934, including our reports on Forms 10-Q and 8-K.
The following discussion should be read in conjunction with the Consolidated Financial Statements and Notes thereto included in Item 8 of this Annual Report.
CRITICAL ACCOUNTING ESTIMATES
Our financial statements and accompanying notes are prepared in accordance with accounting principles generally accepted inthe United States of America , orU.S. GAAP. The preparation of financial statements requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenue, and expenses as well as the disclosure of contingent assets and liabilities. Critical accounting estimates are estimates made in accordance withU.S. GAAP that involve a significant level of estimation uncertainty and have had, or are reasonably likely to have, a material impact on our financial condition or results of operations. Our critical accounting estimates include those related to goodwill impairment testing, valuation of long-lived assets, allowance for doubtful accounts receivable, and income taxes, sales taxes, and regulatory agency fees. See Note 1 to the Consolidated Financial Statements in Item 8 to Part II of this Annual Report for a complete discussion of our significant accounting policies.
Goodwill Impairment Testing
Goodwill is not amortized in accordance withU.S. GAAP. Instead, goodwill is reviewed annually for impairment at a level of reporting referred to as a reporting unit. A reporting unit is an operating segment, or one level below the operating segment, depending on whether certain criteria are met. Our annual assessment date isMay 1 . An interim impairment test would be required whenever events or circumstances make it more likely than not that an impairment may have occurred. The goodwill impairment test compares the fair value of a reporting unit with its carrying amount. We would recognize an impairment charge for the amount by which the carrying amount exceeds the reporting unit's fair value; however, the loss recognized would not exceed the total amount of goodwill. Additionally, we consider income tax effects from any tax-deductible goodwill on the carrying amount of the reporting unit when measuring the goodwill impairment loss, if applicable. We have the option to perform a qualitative assessment to determine whether it is necessary to perform the quantitative goodwill impairment test. However, we may elect to perform the quantitative goodwill impairment test even if no indications of a potential impairment exist. Our goodwill was$26.4 million atJuly 31, 2022 , of which$11.1 million was in ourRetail Communications reporting unit,$9.7 million was in our net2phone reporting unit,$3.2 million was in our Fintech reporting unit, and$2.4 million was in our Mobile Top-Up reporting unit. Our goodwill was$14.9 million atJuly 31, 2021 , of which$11.4 million was in ourRetail Communications reporting unit,$1.5 million was in our net2phone reporting unit, and$2.0 million was in our Mobile Top-Up reporting unit. For our annual goodwill impairment tests as ofMay 1, 2022 and 2021, we performed qualitative assessments for all of our reporting units that indicated that it was more likely than not that the fair values of our reporting units exceeded their respective carrying values and, therefore, did not result in an impairment. In addition, we do not believe we are currently at risk of goodwill impairment. Our qualitative assessments considered several factors including (i) the business enterprise value of the reporting unit from the last quantitative test atMay 1, 2020 and the excess of the fair value over carrying value, (ii) macroeconomic conditions including changes in interest rates and discount rates, (iii) industry and market considerations including industry revenue, EBITDA margins, and multiples based on business enterprise value to revenues and to EBITDA, and (iv) the recent financial performance and budget of the reporting unit, as well as other factors. 43 For our quantitative assessment, we calculate the fair value of the reporting unit using a discounted cash flow method as a form of the income approach, and a market approach that incorporates comparative multiples to corroborate discounted cash flow results. The discounted cash flow method is based on the present value of projected cash flows and a terminal value. The terminal value represents the expected normalized future cash flows of the reporting unit beyond the projection period. We use a discount rate based on the weighted-average cost of capital of comparable companies byStandard Industrial Classification, or SIC, code that represents our estimate of the expected return a marketplace participant would have required. Calculating the fair value of a reporting unit requires significant estimates and assumptions by management. The key assumptions and judgments underlying our quantitative assessment include the discount rates and terminal growth rates used in our discounted cash flow analysis, the revenue and EBITDA projections for our reporting units, estimates of future levels of gross and operating profits and capital expenditures, and the selection of comparable companies for the market approach. Should the estimates and assumptions regarding the fair value of the reporting units prove to be incorrect, we may be required to record impairments to goodwill in future periods.
Valuation of Long-Lived Assets
We test the recoverability of our long-lived assets whenever events or changes in circumstances indicate that the carrying value of any such asset may not be recoverable. Such events or changes in circumstances include:
? significant actual underperformance relative to expected performance or
projected future operating results;
? significant changes in the manner or use of the asset or the strategy of our
overall business;
? significant adverse changes in the business climate in which we operate; and
? loss of a significant contract.
There were no such events or changes in circumstances in fiscal 2022 or fiscal 2021. If we determine that events or changes in circumstances indicate the carrying value of certain long-lived assets may not be recoverable, we test for impairment based on the projected undiscounted cash flows to be derived from such asset. If the projected undiscounted future cash flows are less than the carrying value of the asset, we will record an impairment loss based on the difference between the estimated fair value and the carrying value of the asset. We generally measure fair value by considering sale prices for similar assets or by discounting estimated future cash flows from the asset using an appropriate discount rate. Cash flow projections for specific assets and fair value estimates of assets require significant estimates and assumptions by management that have a significant level of estimation uncertainty. Should our estimates and assumptions prove to be incorrect, we may be required to record impairments in future periods and such impairments could be material.
Allowance for Doubtful Accounts Receivable
Our allowance for doubtful accounts was$5.9 million atJuly 31, 2022 and$4.4 million atJuly 31, 2021 . The allowance for doubtful accounts as a percentage of gross trade accounts receivable decreased to 8.4% atJuly 31, 2022 from 8.7% atJuly 31, 2021 because, atJuly 31, 2022 compared toJuly 31, 2021 , gross trade accounts receivable increased 37.4% and the allowance for doubtful accounts increased 32.5%. The most significant increases in the gross trade accounts receivable balance atJuly 31, 2022 compared toJuly 31, 2021 were in BOSS Money and NRS. We estimate the balance of our allowance for doubtful accounts by analyzing accounts receivable balances by age and applying historical write-off and collection trend rates. Our estimates include separately providing for customer receivables based on specific circumstances and credit conditions, and when it is deemed probable that the balance is uncollectible. Account balances are written off against the allowance when it is determined that the receivable will not be recovered. Our estimates of recoverability of customer accounts may change due to new developments, changes in assumptions or changes in our strategy, which may impact our allowance for doubtful accounts balance. We continually assess the likelihood of potential amounts or ranges of recoverability and adjust our allowance accordingly, however, actual collections and write-offs of trade accounts receivables may materially differ from our estimates.
Income Taxes, Sales Taxes, and Regulatory Agency Fees
Our current and deferred income taxes and associated valuation allowance, accruals for sales taxes, and telecom regulatory agency fee accruals, are impacted by events and transactions arising in the normal course of business as well as in connection with special and non-routine items. Assessment of the appropriate amount of income taxes, sales taxes, and regulatory agency fees is dependent on several factors, including estimates of the timing and realization of deferred income tax assets, judgments about the potential results of audits and applicability of regulatory agency rules and regulations, as well as judgments and assumptions about changes in income tax, sales tax, and regulatory agency laws, rules, or regulations. The valuation allowance on our deferred income tax assets was$11.6 million and$11.5 million atJuly 31, 2022 and 2021, respectively. In fiscal 2021, we released$46.5 million of our valuation allowance on the portion of the deferred income tax assets that we are more likely than not going to utilize. This release was mostly related to domestic deferred income tax assets. We used the framework of Accounting Standards Codification, or ASC, Income Taxes (Topic 740) to determine whether the valuation allowance should be maintained or reversed. We considered the scheduled expiration of our net operating losses included in our deferred tax assets, projected future taxable income, and tax planning strategies in our assessment of the valuation allowance. The primary factors that resulted in the valuation allowance release were the three consecutive years of profitability inthe United States and expected future profitability in boththe United States and theUnited Kingdom that will utilize a significant portion of the net operating losses. Our tax planning strategies were not a significant factor in the analysis. In fiscal 2020, due to taxable income inthe United States , we utilized deferred tax assets and released the corresponding valuation allowance to offset income tax expense of$3.5 million . In addition, in fiscal 2020, we released an additional$8.4 million of the valuation allowance on the portion of the deferred tax assets that we are more likely than not going to utilize because we forecasted future profitability inthe United States . 44 OnJune 21, 2018 , theUnited States Supreme Court rendered a decision inSouth Dakota v. Wayfair, Inc., holding that a state may require a remote seller with no physical presence in the state to collect and remit sales tax on goods and services provided to purchasers in the state, overturning certain existing court precedent. We have evaluated our state tax filings with respect to the Wayfair decision and are in the process of reviewing our remittance practices. It is possible that one or more jurisdictions may assert that we have liability for periods for which we have not collected sales, use or other similar taxes, and if such an assertion or assertions were successful it could materially and adversely affect our business, financial position, and operating results. One or more jurisdictions may change their laws or policies to apply their sales, use or other similar taxes to our operations, and if such changes were made it could materially and adversely affect our business, financial position, and operating results. Our 2017 FCC Form 499-A, which reports our calendar year 2016 revenue, is currently under audit by the USAC.The Internal Audit Division of USAC issued preliminary audit findings and we have, in accordance with audit procedures, appealed certain of the findings. We are awaiting a final decision by USAC on the preliminary audit findings. Depending on the findings contained in the final decision, we may further appeal to the FCC. Although a final decision remains pending, we have been invoiced$2.9 million and$1.8 million on behalf of theFederal Telecommunications Relay Services Fund and on behalf of theUniversal Service Fund , respectively. We do not intend to remit payment for these fees unless and until a negative decision on our appeal has been issued. In response to the aforementioned preliminary audit findings, we made certain changes to our filing policies and procedures for years that remain potentially under audit. AtJuly 31, 2022 and 2021, our accrued expenses included$33.2 million and$38.3 million , respectively, for FCC-related regulatory fees for the year covered by the audit, as well as prior and subsequent years.
RECENTLY ISSUED ACCOUNTING STANDARDS NOT YET ADOPTED
InJune 2022 , theFinancial Accounting Standards Board , or FASB, issued Accounting Standards Update, or ASU, No. 2022-03, Fair Value Measurement (Topic 820), Fair Value Measurement of Equity Securities Subject to Contractual Sale Restrictions, that clarifies that a contractual restriction on the sale of an equity security is not considered part of the unit of account of the equity security and, therefore, is not considered in measuring fair value. The ASU also requires specific disclosures related to equity securities that are subject to contractual sales restrictions. We will adopt the amendments in this ASU prospectively onAugust 1, 2024 . We are evaluating the impact that this ASU will have on our consolidated financial statements. InJune 2016 , the FASB issued ASU No. 2016-13, Financial Instruments-Credit Losses (Topic 326), Measurement of Credit Losses on Financial Instruments, that changes the impairment model for most financial assets and certain other instruments. For receivables, loans and other instruments, entities will be required to use a new forward-looking current expected credit loss model that generally will result in the earlier recognition of allowance for losses. For available-for-sale debt securities with unrealized losses, entities will measure credit losses in a manner similar to current practice, except the losses will be recognized as allowances instead of reductions in the amortized cost of the securities. In addition, an entity will have to disclose significantly more information about allowances, credit quality indicators, and past due securities. The new provisions will be applied as a cumulative-effect adjustment to retained earnings. We will adopt the new standard onAugust 1, 2023 . We are evaluating the impact that the new standard will have on our consolidated financial statements.
RESULTS OF OPERATIONS
We evaluate the performance of our business segments based primarily on income (loss) from operations. Accordingly, the income and expense line items below income (loss) from operations are only included in our discussion of the consolidated results of operations.
Coronavirus Disease (COVID-19)
We continue to monitor and respond to the impacts of the COVID-19 pandemic on all aspects of our business, including our customers, employees, suppliers, vendors, and business partners.
Operationally, our employees transitioned to work-from-home during the third quarter of fiscal 2020 and, to a large degree, continue to work-from-home. Beginning in the fourth quarter of fiscal 2021, certain of our employees returned to work in our offices on a hybrid basis. Our salespeople, customer service employees, technicians, and delivery employees continue to serve our independent retailers, channel partners, and customers with minimal interruption. 45
COVID-19 has had mixed financial impacts on our businesses beginning in the third quarter of fiscal 2020 and continuing through the third quarter of fiscal 2022. It drove increases in demand for our consumer offerings, principally BOSS Money, BOSS Revolution Calling and Mobile Top-Up, through our digital channels beginning in the latter half ofMarch 2020 . Subsequently, digital transaction levels have continued to increase relative to retailer originated transactions. Correspondingly, sales of consumer offerings originating through retailers and channel partners slowed modestly in late March andApril 2020 before stabilizing in the fourth quarter of fiscal 2020. COVID-19-related demand slowed the rate of decline in BOSS Revolution Calling revenue that we had experienced in prior periods, however, that impact was less significant beginning in the first quarter of fiscal 2022 compared to the similar periods in fiscal 2021, and the surge in demand for voice calls that began with the onset of the COVID-19 pandemic had eroded by the third quarter of fiscal 2022. NRS was immaterially impacted by the closure of some of its retailers in the third quarter of fiscal 2020, but most re-opened quickly and many attracted increased foot traffic following the onset of COVID-19 as local retailers were typically more accessible to pedestrian traffic than big box retailers. The resilience of local retailers has enabled NRS to continue to expand sales of terminals, payment processing, and advertising services.IDT Global's revenue, which had been declining as communications globally transition away from traditional international long-distance voice, declined more rapidly following the onset of COVID-19 as business communications shifted from calling to video conferencing and other collaboration platforms. At the onset of the COVID-19 pandemic, the transition from offices to a more flexible workforce increased the demand for net2phone's offerings. Customers transitioned from their on-premises phone system to net2phone's cloud solution, ported their phone numbers, and quickly set-up their employees to work remotely. InApril 2020 , the release of Huddle, net2phone's integrated video conferencing solution, significantly improved net2phone's functionality for remote work, which also increased the demand for its services. COVID-19 had mixed financial impacts on net2phone's business beginning in the third quarter of fiscal 2020. Its customer base growth slowed somewhat in the second half of fiscal 2020 in certain Latin American markets due to decreased levels of economic activity in those markets. However, Latin American sales rebounded in the first quarter of fiscal 2021 and sales have remained strong in itsUnited States and Canadian markets. As of the date of this Annual Report, including the impact of COVID-19, we expect that our cash from operations and the balance of cash, cash equivalents, debt securities, and current equity investments that we held onJuly 31, 2022 will be sufficient to meet our currently anticipated working capital and capital expenditure requirements during fiscal 2023. However, the situation remains fluid and we cannot predict with certainty the potential impact of COVID-19 on our business, results of operations, financial condition, and cash flows.
Concentration of Customers
Our most significant customers typically include telecom operators to whom we provide wholesale services and distributors of our retail calling products. While they may vary from quarter to quarter, our five largest customers collectively accounted for 12.5%, 14.5%, and 12.7% of our consolidated revenues in fiscal 2022, fiscal 2021, and fiscal 2020, respectively. Our customers with the five largest receivables balance collectively accounted for 17.3% and 9.7% of our consolidated gross trade accounts receivable atJuly 31, 2022 and 2021, respectively. This concentration of customers increases our risk associated with nonpayment by those customers. In an effort to reduce our risk, we perform ongoing credit evaluations of our significant customers, and in some cases, do not offer credit terms to customers, choosing instead to require prepayment. Historically, when we have issued credit, we have not required collateral to support trade accounts receivables from our customers. However, when necessary, we have imposed stricter credit restrictions on our customers. In some cases, this has resulted in our sharply curtailing, or ceasing completely, sales to certain customers. We attempt to mitigate our credit risk related to specificIDT Global customers by also buying services from the customer, in order to create an opportunity to offset our payables and receivables with the customer. In this way, we can continue to sell services to these customers while reducing our receivable exposure risk. When it is practical to do so, we will increase our purchases fromIDT Global customers with receivable balances that exceed our applicable payables in order to maximize the offset and reduce our credit risk.
Explanation of Performance Metrics
Our results of operations discussion include the following performance metrics: active POS terminals, payment processing accounts, recurring revenue, subscriber seats, subscription revenue, and minutes of use. NRS uses two metrics, among others, to measure the size of its customer base: active POS terminals and payment processing accounts. Active POS terminals are the number of POS terminals that have completed at least one transaction in the calendar month. It excludes POS terminals that are being installed. Payment processing accounts are NRS PAY accounts that can generate revenue. It excludes accounts that have been approved but not activated. NRS' recurring revenue is NRS' revenue in accordance withU.S. GAAP, excluding its revenue from POS terminal sales. net2phone's cloud communications offerings are priced on a per-seat basis, with customers paying based on the number of users in their organization. net2phone's subscription revenue is its revenue in accordance withU.S. GAAP excluding its equipment revenue and revenue generated by a legacy SIP trunking offering inBrazil . 46 The trends and comparisons between periods for the number of active POS terminals, NRS PAY accounts, seats served, recurring revenue, and subscription revenue are used in the analysis of NRS' or net2phone's revenues and direct cost of revenues and are strong indications of the top-line growth and performance of the business. Minutes of use is a nonfinancial metric that measures aggregate customer usage during a reporting period. Minutes of use is an important factor in BOSS Revolution Calling's andIDT Global's revenue recognition since satisfaction of our performance obligation occurs when the customer uses our service. Minutes of use trends and comparisons between periods are used in the analysis of revenues and direct cost of revenues.
Year Ended
In fiscal 2022, a line of business was reclassified to the net2phone segment from theTraditional Communications segment. Comparative segment information has been reclassified and restated in all periods to conform to the current period presentation.
The following table sets forth certain items in our statements of income as a percentage of our total revenues:
Year ended July 31 2022 2021 2020 REVENUES: Fintech 8.0 % 5.1 % 4.5 % net2phone 4.3 3.1 2.4 Traditional Communications 87.7 91.8 93.1 TOTAL REVENUES 100.0 100.0 100.0 COSTS AND EXPENSES: Direct cost of revenues (exclusive of depreciation and amortization) 75.8 79.8
80.5
Selling, general and administrative 18.4 15.1
16.0
Depreciation and amortization 1.3 1.2 1.5
Severance - - 0.3
TOTAL COSTS AND EXPENSES 95.5 96.1 98.3Other operating (expense) gain, net (0.1 ) 0.1
(0.4 )
INCOME FROM OPERATIONS 4.4 4.0 1.3
Interest income, net - - 0.1
Other (expense) income, net (1.8 ) 0.5 (0.1 )
INCOME BEFORE INCOME TAXES 2.6 % 4.5 % 1.3 %
Fintech Segment
Fintech, which represented 8.0%, 5.1%, and 4.5% of our total revenues in fiscal
2022, fiscal 2021, and fiscal 2020, respectively, is comprised of BOSS Money, a
provider of international money remittance and related value/payment transfer
services, and NRS, an operator of a nationwide POS network providing payment
processing, digital advertising, transaction data, and ancillary services.(in millions) 2022 change from 2021 2021 change from 2020 Year ended July 31 2022 2021 2020 $ % $ % Revenues: BOSS Money$ 57.5 $ 49.6 $ 47.9 $ 7.9 15.9 %$ 1.7 3.4 % National Retail Solutions 51.3 24.7 12.0 26.6 107.3 12.7 106.6 Total revenues 108.8 74.3 59.9 34.5 46.3 14.4 24.1
Direct cost of revenues (32.8 ) (26.2 ) (19.2 ) 6.6
25.0 7.0 36.1
Selling, general and
administrative (68.0 ) (47.9 ) (35.8 ) 20.1 41.9 12.1 33.9
Depreciation and
amortization (2.7 ) (1.7 ) (1.5 ) 1.0 55.6 0.2 14.9
Income (loss) from
operations $ 5.3 $ (1.5 ) $ 3.4 $ 6.8 463.4 % $ (4.9 ) (143.2 )%
Revenues. Revenues from BOSS Money increased in fiscal 2022 and fiscal 2021 compared to the prior fiscal year primarily because of increased transaction volume in BOSS Money's direct-to-consumer digital and retail channels. The revenue increase in fiscal 2022 compared to fiscal 2021was partially offset by the lack of revenue from transient foreign exchange market conditions that materially improved BOSS Money's revenues in fiscal 2021 but ceased by the end of the second quarter of fiscal 2021. The revenue increase in fiscal 2021 compared to fiscal 2020 also included the diminished benefit from transient foreign exchange market conditions in fiscal 2021 compared to fiscal 2020. BOSS Money continues to benefit from its integration into the BOSS Revolution Calling app inOctober 2021 , as well as the continued expansion of its disbursement networks, particularly inAfrica and theCaribbean . 47
Revenues from NRS increased in fiscal 2022 and fiscal 2021 compared to the prior fiscal year driven primarily by the expansion of its POS network, and revenue growth from its payment processing services and digital out-of-home advertising. NRS' recurring revenue increased 129% to$45.3 million in fiscal 2022 from$19.8 million in fiscal 2021 and increased 132% in fiscal 2021 from$8.5 million in fiscal 2020. Active POS terminals increased 38% to 19,400 atJuly 31, 2022 from 14,000 atJuly 31, 2021 and increased 40% atJuly 31, 2021 from 10,000 atJuly 31, 2020 . Payment processing accounts increased 77% to 10,300 atJuly 31, 2022 from 5,800 atJuly 31, 2021 and increased 133% atJuly 31, 2021 from 2,500 atJuly 31, 2020 . Direct Cost of Revenues. BOSS Money's direct cost of revenues increased in fiscal 2022 compared to fiscal 2021 due to increased direct cost of revenues in its direct-to-consumer digital and retail channels, which reflected the increase in BOSS Money's revenue. BOSS Money's direct cost of revenues increased in fiscal 2021 compared to fiscal 2020 primarily due to increased direct cost of revenues in its direct-to-consumer channel, which reflected the increase in BOSS Money's direct-to-consumer channel's revenue. NRS' direct cost of revenues increased in fiscal 2022 and fiscal 2021 compared to the prior fiscal year primarily due to the increases in its revenues in such periods. Selling, General and Administrative. Selling, general and administrative expense increased in fiscal 2022 compared to fiscal 2021 primarily due to increases in sales commissions, employee compensation, stock-based compensation, and debit and credit card processing charges. Selling, general and administrative expense increased in fiscal 2021 compared to fiscal 2020 primarily due to increases in employee compensation, debit and credit card processing charges, sales commissions, and marketing expense. The increases in card processing charges were the result of increased credit and debit card transactions through our BOSS Money app and other digital channels. As a percentage of Fintech's revenue, Fintech's selling, general and administrative expense was 62.5%, 64.5%, and 59.7% in fiscal 2022, fiscal 2021, and fiscal 2020, respectively. Depreciation and Amortization. Depreciation and amortization expense increased in fiscal 2022 and fiscal 2021 compared to the prior fiscal year primarily due to increased depreciation of capitalized costs of consultants and employees developing internal use software.
net2phone Segment
The net2phone segment, which represented 4.3%, 3.1%, and 2.4% of our total revenues in fiscal 2022, fiscal 2021, and fiscal 2020, respectively, is comprised of net2phone's cloud communications offerings.
(in millions) 2022 change from 2021 2021 change from 2020 Year ended July 31 2022 2021 2020 $ % $ % Revenues$ 58.2 $ 44.5 $ 32.5 $ 13.7 30.7 %$ 12.0 37.1 %
Direct cost of revenues (10.0 ) (8.7 ) (6.9 ) 1.3 15.9 1.8 26.5 Selling, general and administrative (54.2 ) (46.1 ) (37.7 ) 8.1 17.4 8.4 22.8 Depreciation and amortization (5.4 ) (5.1 ) (4.1 ) 0.3 6.4 1.0 21.9 Other operating gain (expense), net 0.3 (0.1 ) (0.6 ) (0.4 ) (393.2 ) (0.5 ) (84.3 ) Loss from operations$ (11.1 ) $ (15.5 ) $ (16.8 ) $ 4.4 28.0 %$ 1.3 7.8 % Revenues. net2phone's revenues increased in fiscal 2022 and fiscal 2021 compared to the prior fiscal year driven primarily by growth inthe United States , although revenue increased in all net2phone regions. Seats served increased 29% to 291,000 atJuly 31, 2022 from 226,000 atJuly 31, 2021 and increased 47% atJuly 31, 2021 from 154,000 atJuly 31, 2020 . The increase in seats served atJuly 31, 2022 compared toJuly 31, 2021 included approximately 7,000 seats as a result of our acquisition of Integra inMarch 2022 . Subscription revenue increased 38% to$53.6 million in fiscal 2022 from$38.8 million in fiscal 2021, led by growth in both the South American and North American regions, and increased 47% in fiscal 2021 from$26.5 million in fiscal 2020, led by growth in the U.S. market. In the first quarter of fiscal 2022, net2phone launched a HIPAA-compliant program for certain of its communications and collaboration solutions and introduced net2phone's Phone App for Teams. The app enables Microsoft Teams users to add voice capabilities into Teams environments without additional licenses. net2phone launched its integration with Slack in the third quarter of fiscal 2021, building on its prior integrations with Zoho and Microsoft Teams. Also in fiscal 2021, net2phone launched an integration with Salesforce. InNovember 2020 , net2phone announced it had launched its service inPeru and inDecember 2020 , it expanded coverage to six additional cities in
Brazil . 48 Direct Cost of Revenues. Direct cost of revenues increased in fiscal 2022 compared to fiscal 2021 primarily due to the increase in revenues, with the largest increases inLatin America . Direct cost of revenues increased in fiscal 2021 compared to fiscal 2020 primarily due to the increase in revenues, with the largest increases inthe United States andLatin America . net2phone's focus on mid-sized businesses, multi-channel strategies, and localized offerings generated revenue growth that exceeded the increase in direct cost of revenues. Selling, General and Administrative. Selling, general and administrative expense increased in fiscal 2022 compared to fiscal 2021 primarily due to increases in sales commissions, employee compensation, and expenses related to the proposed (and subsequently postponed) spin-off of our net2phone cloud communications business. Selling, general and administrative expense increased in fiscal 2021 compared to fiscal 2020 primarily due to increases in employee compensation and sales commissions. As a percentage of net2phone's revenues, net2phone's selling, general and administrative expenses decreased to 93.1% from 103.7% and 115.8% in fiscal 2022, fiscal 2021, and fiscal 2020, respectively. net2phone derives a significant portion of its revenues from existing customers. Attracting new customers usually involves additional costs compared to retention of existing customers. If existing customers' subscriptions and related usage decrease or are terminated, net2phone will need to spend more money to acquire new customers and still may not be able to maintain its existing level of revenues or profitability. In addition, net2phone needs to acquire new customers to increase its revenues. net2phone incurs significant sales and marketing expenses to acquire new customers. It is therefore expected that selling, general and administrative expenses will remain a significant percentage of net2phone's revenues for the foreseeable future. Depreciation and Amortization. The increases in depreciation and amortization expense in fiscal 2022 and fiscal 2021 compared to the prior fiscal year was due to increased depreciation of net2phone's telephone equipment leased to customers and increased depreciation of capitalized costs of consultants and employees developing internal use software. Other Operating Gain (Expense), net. In fiscal 2022, we determined that the requirements for a contingent consideration payment related to an acquisition consummated inDecember 2019 would not be met before the expiration date for such contingency. net2phone recognized a gain of$0.3 million on the write-off of the contingent consideration payment obligation. Other operating expense, net in fiscal 2021 was due to the settlement of a legal matter. Other operating expense, net in fiscal 2020 was due to the write-offs of certain assets related to a cancelled project and dormant subsidiaries primarily inLatin America .
Traditional Communications Segment
The Traditional Communications segment, which represented 87.7%, 91.8%, and 93.1% of our total revenues in fiscal 2022, fiscal 2021, and fiscal 2020, respectively, includes Mobile Top-Up, which enables customers to transfer airtime and bundles of airtime, messaging, and data to international and domestic mobile accounts, BOSS Revolution Calling, an international long-distance calling service marketed primarily to immigrant communities inthe United States andCanada , andIDT Global , a wholesale provider of international voice and SMS termination and outsourced traffic management solutions to telecoms worldwide.Traditional Communications also includes other small businesses and offerings including early-stage business initiatives and mature businesses in harvest mode.Traditional Communications' most significant revenue streams are from Mobile Top-Up, BOSS Revolution Calling, andIDT Global . Mobile Top-Up and BOSS Revolution Calling are sold direct-to-consumers and through distributors and retailers. We receive payments for BOSS Revolution Calling, traditional calling cards, and Mobile Top-Up prior to providing the services. We recognize the revenue when services are provided to the customer.Traditional Communications' revenues tend to be somewhat seasonal, with the second fiscal quarter (which contains Christmas andNew Year's Day ) and the fourth fiscal quarter (which containsMother's Day andFather's Day ) typically showing higher minute volumes. (in millions) 2022 change from 2021 2021 change from 2020 Year ended July 31 2022 2021 2020 $/# % $/# % Revenues: Mobile Top-Up$ 473.2 $ 461.6 $ 334.4 $ 11.6 2.5 %$ 127.2 38.0 % BOSS Revolution Calling 387.9 455.2 468.3 (67.3 ) (14.8 ) (13.1 ) (2.8 ) IDT Global 292.4 361.0 394.3 (68.6 ) (19.0 ) (33.3 ) (8.5 ) Other 43.6 50.3 56.4 (6.7 ) (13.3 ) (6.1 ) (10.8 )
Total revenues 1,197.1 1,328.1 1,253.4 (131.0 ) (9.9 ) 74.7 6.0
Direct cost of revenues (991.7 ) (1,119.2 ) (1,057.9 ) (127.5 ) (11.4 )
61.3 5.8
Selling, general and
administrative (120.5 ) (116.8 ) (132.4 ) 3.7 3.1 (15.6 ) (11.7 )
Depreciation and
amortization (9.9 ) (10.9 ) (14.7 ) (1.0 ) (8.7 ) (3.8 ) (25.9 )
Severance (0.1 ) (0.5 ) (3.5 ) (0.4 ) (74.3 ) (3.0 ) (87.0 )
Other operating
(expense) gain, net (0.1 ) 0.6 (3.9 ) (0.7 ) (118.5 ) 4.5 114.4
Income from operations
(6.5 ) (7.9 )%
Minutes of use: BOSS Revolution Calling 2,926 3,554 3,913
(628 ) (17.7 )% (359 ) (9.2 )% IDT Global 7,720 10,511 14,398 (2,791 ) (26.6 ) (3,887 ) (27.0 ) 49
Revenues. Revenues from Mobile Top-Up increased in fiscal 2022 compared to fiscal 2021 primarily from an increase in direct-to-consumer channel revenues, partially offset by a decrease in retail channel revenues. Mobile Top-Up's revenues increased in fiscal 2021 compared to fiscal 2020 primarily from continued product expansion and growth in the business-to-business wholesale channel that was added in fiscal 2021, although revenues from Mobile Top-Up's business-to-business wholesale channel narrowed considerably in fiscal 2022 compared to fiscal 2021. InDecember 2020 , our acquisition of Sochitel, a global hub and digital distribution platform for mobile top-up, electronic vouchers, and other value transfer services primarily inAfrica , contributed to our increased penetration into the market inAfrica . Revenues and minutes of use from BOSS Revolution Calling decreased in fiscal 2022 and fiscal 2021 compared to the prior fiscal year. In fiscal 2021, COVID-19-related demand slowed the rate of decline in BOSS Revolution Calling revenue that we had experienced in prior periods, however, the COVID-19-related impact was less significant in fiscal 2022 than in fiscal 2021. The surge in demand for voice calls that began with the onset of the COVID-19 pandemic had eroded by the third quarter of fiscal 2022. BOSS Revolution Calling continues to be impacted by persistent, market-wide trends, including the proliferation of unlimited calling plans offered by wireless carriers and mobile virtual network operators, and the increasing penetration of free and paid over-the-top voice, video conferencing, and messaging services. Revenues and minutes of use fromIDT Global decreased in fiscal 2022 and fiscal 2021 compared to the prior fiscal year as communications globally continued to transition away from international voice calling. This trend was accelerated by the impact of COVID-19 as business communications shifted from calling to video conferencing and other collaboration platforms. We expect thatIDT Global will continue to be adversely impacted by these trends, and minutes of use and revenues will likely continue to decline from quarter-to-quarter, as we seek to maximize economics rather than necessarily sustain minutes of use or revenues. Direct Cost of Revenues. Direct cost of revenues decreased in fiscal 2022 compared to fiscal 2021 primarily due to decreases in BOSS Revolution Calling's andIDT Global's direct cost of revenues in fiscal 2022 compared to fiscal 2021, partially offset by an increase in Mobile Top-Up's direct cost of revenues in fiscal 2022 compared to fiscal 2021 as a result of the increase in Mobile Top-Up's revenues. Direct cost of revenues increased in fiscal 2021 compared to fiscal 2020 primarily due to an increase in Mobile Top-Up's direct cost of revenues in fiscal 2021 compared to fiscal 2020 as a result of the increase in its revenues, partially offset by decreases inIDT Global's and BOSS Revolution Calling's direct cost of revenues in fiscal 2021 compared to fiscal 2020. The migration of customers to our digital, direct-to-consumer channels in fiscal 2022 and fiscal 2021 is expected to continue, which is expected to contribute to future reductions in the rate of growth of Mobile Top-Up and BOSS Revolution Calling's direct cost of revenues when compared to prior periods. Selling, General and Administrative. Selling, general and administrative expense increased in fiscal 2022 compared to fiscal 2021 primarily due to increases in marketing expense, employee compensation, and consulting expense, partially offset by a decrease in sales commissions. Selling, general and administrative expense decreased in fiscal 2021 compared to fiscal 2020 primarily due to decreases in employee compensation, stock-based compensation, marketing expense, and bad debt expense, partially offset by an increase in debit and credit card processing charges. As a percentage ofTraditional Communications' revenue,Traditional Communications' selling, general and administrative expense was 10.1%, 8.8%, and 10.6% in fiscal 2022, fiscal 2021, and fiscal 2020, respectively. Depreciation and Amortization. Depreciation and amortization expense decreased in fiscal 2022 and fiscal 2021 compared to the prior fiscal year as more of our property, plant, and equipment became fully depreciated, partially offset by depreciation of equipment added to our telecommunications network and capitalized costs of consultants and employees developing internal use software.
Severance Expense. We incurred severance expense of
50 Other Operating (Expense) Gain, net. Other operating (expense) gain, net included expense for the indemnification of a net2phone cable telephony customer related to patent infringement claims brought against the customer of$0.1 million ,$0.5 million , and$1.2 million in fiscal 2022, fiscal 2021, and fiscal 2020, respectively. Other operating (expense) gain, net in fiscal 2021 included a gain of$2.0 million received from the sale to a third party of all our rights under the Payment Card Interchange Fee and Merchant Discount Antitrust Litigation related to claims that merchants paid excessive fees to acceptVisa and Mastercard cards betweenJanuary 1, 2004 andJanuary 25, 2019 . Other operating (expense) gain, net in fiscal 2021 also included expense for a settlement of anIDT Global claim for$0.6 million and other expense of$0.3 million . Other operating (expense) gain, net in fiscal 2020 included an accrual for non-income related taxes related to one of our foreign subsidiaries of$2.2 million and expense of$0.5 million for a legal matter. Corporate (in millions) 2022 change from 2021 2021 change from 2020 Year ended July 31 2022 2021 2020 $ % $ % General and administrative$ (7.8 ) $ (7.5 ) $ (9.1 ) $ 0.3 3.6 %$ (1.6 ) (16.6 )% Depreciation and amortization (0.1 ) (0.1 ) (0.1 ) - 1.6 - 64.4 Other operating (expense) gain, net (1.0 ) 0.2 (0.5 ) 1.2 560.0 (0.7 ) (142.4 ) Loss from operations$ (8.9 ) $ (7.4 ) $ (9.7 ) $ (1.5 ) (20.7 )%$ 2.3 23.5 %
Corporate costs mainly include compensation, consulting fees, treasury, tax and accounting services, human resources, corporate purchasing, corporate governance including Board of Directors' fees, internal and external audit, investor relations, corporate insurance, corporate legal, and other corporate-related general and administrative expenses. Corporate does not generate any revenues, nor does it incur any direct cost of revenues. General and Administrative. Corporate general and administrative expense increased in fiscal 2022 compared to fiscal 2021 primarily because of an increase in employee compensation. Corporate general and administrative expense decreased in fiscal 2021 compared to fiscal 2020 primarily because of a decrease in stock-based compensation due to reductions in expense of deferred stock units granted inJune 2019 and stock options, as well as a decrease in employee compensation. As a percentage of our consolidated revenues, Corporate general and administrative expense was 0.6%, 0.5%, and 0.7% in fiscal 2022, fiscal 2021, and fiscal 2020, respectively. Other Operating (Expense) Gain, net. As discussed in Note 23 to the Consolidated Financial Statements included in Item 8 to Part II of this Annual Report, we (as well as other defendants) have been named in a pending putative class action on behalf of Straight Path's stockholders and a derivative complaint. We incurred legal fees of$7.7 million ,$2.9 million , and$3.6 million in fiscal 2022, fiscal 2021, and fiscal 2020, respectively, related to this action. Also, we recorded offsetting gains from insurance claims for this matter of$6.7 million ,$3.1 million , and$3.1 million in fiscal 2022, fiscal 2021, and fiscal 2020, respectively. Consolidated
The following is a discussion of certain of our consolidated expenses, and our consolidated income and expense line items below income from operations.
Related Party Lease Costs. We lease office and parking space in a building and parking garage located at520 Broad St ,Newark, New Jersey that was owned by Rafael Holdings. OnAugust 22, 2022 , Rafael Holdings sold the building and parking garage to an unrelated third party. Our lease in that building continues with the new owner. We also lease office space inIsrael from Rafael Holdings. TheNewark lease expires inApril 2025 and theIsrael lease expires inJuly 2025 . In fiscal 2022, fiscal 2021, and fiscal 2020, we incurred lease costs of$2.0 million ,$1.9 million , and$1.9 million , respectively, in connection with the Rafael Holdings' leases, which is included in consolidated selling, general and administrative expenses. Stock-Based Compensation Expense. Stock-based compensation expense included in consolidated selling, general and administrative expenses was$1.9 million ,$1.5 million , and$3.9 million in fiscal 2022, fiscal 2021, and fiscal 2020, respectively. The increase in stock-based compensation expense in fiscal 2022 compared to fiscal 2021 was primarily due to expense related to the grant inFebruary 2022 of restricted shares of NRS' Class B common stock to certain of our employees for which we recorded stock-based compensation expense of$1.2 million , partially offset by reductions in expense for deferred stock units granted inJune 2019 . The decrease in stock-based compensation expense in fiscal 2021 compared to fiscal 2020 was primarily due to reductions in expense of deferred stock units granted inJune 2019 and stock options. Effective as ofJune 30, 2022 , restricted shares of NRS' Class B common stock were granted to certain NRS employees. The restrictions on the shares will lapse in three installments on each ofJune 1, 2024 , 2026, and 2027. The estimated fair value of the restricted shares on the grant date was$3.3 million , which will be recognized over the vesting period. AtJuly 31, 2022 , unrecognized compensation cost related to non-vested stock-based compensation was an aggregate of$3.5 million . The unrecognized compensation cost is expected to be recognized over the remaining vesting periods that end in fiscal 2027. 51 (in millions) 2022 change from 2021 2021 change from 2020 Year ended July 31 2022 2021 2020 $ % $ % Income from operations$ 60.1 $ 57.0 $ 17.9 $ 3.1 5.4 %$ 39.1 217.6 % Interest income, net 0.2 0.3 1.1 (0.1 ) (54.1 ) (0.8 ) (69.5 ) Other (expense) income, net (25.4 ) 7.9 (1.3 ) (33.3 ) (420.3 ) 9.2 724.8 (Provision for) benefit from income taxes (5.9 ) 31.7 3.7 (37.6 ) (118.6 ) 28.0 755.9 Net income 29.0 96.9 21.4 (67.9 ) (70.1 ) 75.5 352.4 Net (income) loss attributable to noncontrolling interests (2.0 ) (0.4 ) - (1.6 ) (375.2 ) (0.4 ) nm Net income attributable to IDT Corporation$ 27.0 $ 96.5 $ 21.4 $ (69.5 ) (72.0 )%$ 75.1 350.2 % nm-not meaningful Other (Expense) Income, net. Other (expense) income, net consists of the following: (in millions) Year ended July 31 2022 2021 2020
Foreign currency transaction (losses) gains
0.4
Equity in net loss of investee (3.0 ) (1.1 )
-
Write-off of tax assets related to prior periods - - (1.3 ) (Losses) gains on investments (19.3 ) 8.8 (0.3 ) Other (1.4 ) (0.8 ) (0.1 ) TOTAL$ (25.4 ) $ 7.9 $ (1.3 ) OnFebruary 2, 2021 , we paid$4.0 million to purchase shares of series B convertible preferred stock of a communications company (the equity method investee, or EMI), and onAugust 10, 2021 , we paid$1.1 million to purchase shares of the EMI's series C convertible preferred stock and additional shares of the EMI's series B convertible preferred stock. The initial shares purchased represented 23.95% of the outstanding shares of the EMI on an as converted basis. The subsequent purchases increased our ownership to 26.57% on an as converted basis. We account for this investment using the equity method since the series B and series C convertible preferred stock are in-substance common stock, and we can exercise significant influence over the operating and financial policies of the EMI. We determined that on the dates of the acquisitions, there were differences of$3.4 million and$1.0 million between our investment in the EMI and our proportional interest in the equity of the EMI, which represented the share of the EMI's customer list on the dates of the acquisitions attributed to our interest in the EMI. These basis differences are being amortized over the 6-year estimated life of the customer list. The net losses on investments in fiscal 2022 included an unrealized loss of$14.1 million on shares of Rafael Holdings' Class B common stock. The net gains on investments in fiscal 2021 included an unrealized gain of$8.3 million on shares of Rafael Holdings' Class B common stock. The net losses on investments in fiscal 2020 included an unrealized loss of$0.2 million on shares of Rafael Holdings' Class B common stock. (Provision for) Benefit from Income Taxes. In fiscal 2021, we released$46.5 million of our valuation allowance on the portion of our deferred income tax assets that we are more likely than not going to utilize. This release was mostly related to domestic deferred income tax assets. We used the framework of ASC Income Taxes (Topic 740) to determine whether the valuation allowance should be maintained or reversed. We considered the scheduled expiration of our net operating losses included in our deferred tax assets, projected future taxable income, and tax planning strategies in our assessment of the valuation allowance. The primary factors that resulted in the valuation allowance release were the three consecutive years of profitability inthe United States and expected future profitability in boththe United States and theUnited Kingdom that will utilize a significant portion of the net operating losses. Our tax planning strategies were not a significant factor in the analysis. In fiscal 2020, due to taxable income inthe United States , we utilized deferred tax assets and released the corresponding valuation allowance to offset income tax expense of$3.5 million . In addition, in fiscal 2020, we released an additional$8.4 million of the valuation allowance on the portion of the deferred tax assets that we are more likely than not going to utilize because we forecasted future profitability inthe United States . 52
The decrease in income tax expense in fiscal 2022 compared to fiscal 2021, and the increase in income tax expense in fiscal 2021 compared to fiscal 2020, excluding the benefits from the valuation allowance released in fiscal 2021 and fiscal 2020, was primarily due to differences in the amount of taxable income earned in the various taxing jurisdictions. Net (Income) Loss Attributable to Noncontrolling Interests. The change in the net (income) loss attributable to noncontrolling interests in fiscal 2022 compared to fiscal 2021 was primarily due to increases in the net income of NRS and our variable interest entity, or VIE, partially offset by an increase in the net loss of net2phone 2.0, Inc., or net2phone 2.0, which owns and operates our net2phone segment. As ofMay 31, 2021 , we began consolidating a VIE because we determined that we are the primary beneficiary of the VIE since we have the power to direct the activities of the VIE that most significantly impact its economic performance, and we have the obligation to absorb losses of and the right to receive benefits from the VIE that could potentially be significant to it. We do not currently own any interest in the VIE and thus the net income incurred by the VIE was attributed to noncontrolling interests. The change in the net (income) loss attributable to noncontrolling interests in fiscal 2021 compared to fiscal 2020 was due to the reduction in the net loss of NRS, as well as new noncontrolling interests in fiscal 2021. In fiscal 2021, we acquired an aggregate of 75% of the issued shares of Sochitel, and as ofMay 31, 2021 , we began consolidating the VIE. Finally, onDecember 31, 2020 ,Howard S. Jonas , the Chairman of our Board of Directors, andShmuel Jonas , our Chief Executive Officer, each received fifty restricted shares of net2phone 2.0 Class B common stock, which represented an aggregate of 10% of net2phone 2.0's issued and outstanding common stock atJuly 31, 2022 .
LIQUIDITY AND CAPITAL RESOURCES
As of the date of this Annual Report, including the impact of COVID-19, we
currently expect our cash from operations and the balance of cash, cash
equivalents, debt securities, and current equity investments that we held on
At
We treat unrestricted cash and cash equivalents held byIDT Payment Services, Inc. andIDT Payment Services of New York, LLC as substantially restricted and unavailable for other purposes. AtJuly 31, 2022 , "Cash and cash equivalents" in our consolidated balance sheet included an aggregate of$17.3 million held byIDT Payment Services, Inc. andIDT Payment Services of New York, LLC that was unavailable for other purposes.
Contractual Obligations and Commitments
The following table includes our anticipated material cash requirements from
contractual obligations and other commitments at
Payments due by period Less than (in millions) Total 1 year 1-3 years 4-5 years After 5 years Purchase commitments$ 4.7 $ 4.7 $ - $ - $ - Connectivity obligations under service agreements 0.5 0.4 0.1 - - Operating leases including short-term leases 8.3 3.5 4.4 0.3 0.1 TOTAL(1)$ 13.5 $ 8.6 $ 4.5 $ 0.3 $ 0.1
(1) The above table does not include up to
redemption of shares of NRS' Class B common stock, an aggregate of
million in performance bonds, and up to
payments including contingent consideration related to business
acquisitions, due to the uncertainty of the amount and/or timing of any such
payments.
Consolidated Financial Condition
(in millions) Year ended July 31 2022 2021
2020
Cash flows provided by (used in): Operating activities$ 29.4 $ 66.6 $ (29.6 ) Investing activities (33.8 ) (44.1 ) (32.5 ) Financing activities (15.6 ) (4.5 ) (5.6 ) Effect of exchange rate changes on cash, cash equivalents, and restricted cash and cash equivalents (17.4 ) 7.7
11.7
(Decrease) increase in cash, cash equivalents, and restricted cash and cash equivalents$ (37.4 ) $ 25.7 $ (56.0 ) 53 Operating Activities Our cash flows from operations vary significantly from quarter to quarter and from year to year, depending on our operating results and the timing of operating cash receipts and payments, specifically trade accounts receivable and trade accounts payable. Gross trade accounts receivable increased to$70.2 million atJuly 31, 2022 from$51.1 million atJuly 31, 2021 and$50.3 million atJuly 31, 2020 primarily due to amounts billed during fiscal 2022 and fiscal 2021 that were greater than collections in fiscal 2022 and fiscal 2021. The most significant increases in the gross trade accounts receivable balance atJuly 31, 2022 compared toJuly 31, 2021 were in BOSS Money and NRS. Deferred revenue arises from sales of prepaid products and varies from period to period depending on the mix and the timing of revenues. Deferred revenue decreased to$36.5 million atJuly 31, 2022 from$42.3 million atJuly 31, 2021 due to decreases in the BOSS Revolution Calling and Mobile Top-Up deferred revenue balances, and increased atJuly 31, 2021 from$40.1 million atJuly 31, 2020 primarily due to an increase in the BOSS Revolution Calling deferred revenue balance. Customer deposit liabilities atIDT Financial Services Limited , ourGibraltar -based bank, decreased to$85.8 million atJuly 31, 2022 from$115.5 million atJuly 31, 2021 and$116.0 million atJuly 31, 2020 . Our restricted cash and cash equivalents included$86.6 million ,$115.8 million , and$116.3 million atJuly 31, 2022 , 2021, and 2020, respectively, held by the bank. OnDecember 21, 2020 , we received$2.0 million from the sale to a third party of all our rights under the Payment Card Interchange Fee and Merchant Discount Antitrust Litigation related to claims that merchants paid excessive fees to acceptVisa and Mastercard cards betweenJanuary 1, 2004 andJanuary 25, 2019 . OnJune 21, 2018 , theUnited States Supreme Court rendered a decision inSouth Dakota v. Wayfair, Inc., holding that a state may require a remote seller with no physical presence in the state to collect and remit sales tax on goods and services provided to purchasers in the state, overturning certain existing court precedent. We have evaluated our state tax filings with respect to the Wayfair decision and are in the process of reviewing our remittance practices. It is possible that one or more jurisdictions may assert that we have liability for periods for which we have not collected sales, use or other similar taxes, and if such an assertion or assertions were successful it could materially and adversely affect our business, financial position, and operating results. One or more jurisdictions may change their laws or policies to apply their sales, use or other similar taxes to our operations, and if such changes were made it could materially and adversely affect our business, financial position, and operating results. In connection with our spin-off of Straight Path inJuly 2013 , we and Straight Path entered into various agreements prior to the spin-off including a Separation and Distribution Agreement to effect the separation and provide a framework for our relationship with Straight Path after the spin-off, and a Tax Separation Agreement, which sets forth the responsibilities of us and Straight Path with respect to, among other things, liabilities for federal, state, local, and foreign taxes for periods before and including the spin-off, the preparation and filing of tax returns for such periods and disputes with taxing authorities regarding taxes for such periods. Pursuant to the Separation and Distribution Agreement, we indemnify Straight Path and Straight Path indemnifies us for losses related to the failure of the other to pay, perform or otherwise discharge, any of the liabilities and obligations set forth in the agreement. Pursuant to the Tax Separation Agreement, we indemnify Straight Path from all liability for taxes of Straight Path or any of its subsidiaries or relating to the Straight Path business with respect to taxable periods ending on or before the spin-off, from all liability for taxes of ours, other than Straight Path and its subsidiaries, for any taxable period, and from all liability for taxes due to the spin-off. (see Note 23 to the Consolidated Financial Statements included in Item 8 to Part II of this Annual Report).
Investing Activities
Our capital expenditures were$21.9 million in fiscal 2022,$16.8 million in fiscal 2021 and$16.0 million in fiscal 2020. We currently anticipate that total capital expenditures in fiscal 2023 will be$19 million to$21 million . We expect to fund our capital expenditures with our net cash provided by operating activities and cash, cash equivalents, debt securities, and current equity
investments on hand. 54
OnMarch 3, 2022 , net2phone 2.0 purchased all of the outstanding shares of Onwaba S.R.L. and Gem S.R.L. for cash of$7.1 million , net of cash acquired. We also recorded an aggregate of$4.5 million for the estimated fair value of future payments subject to holdback and contingent consideration. Onwaba S.R.L. and Gem S.R.L. are located inUruguay and use the trade name Integra CCS. The purchase price also included 27,765 shares of our Class B common stock with a value of$1.0 million that were issued at closing. The potential future payments are an aggregate of up to$3.3 million , half of which will be paid at the end of 12 months after closing and the remainder will be paid at the end of 24 months after closing, subject to holdback for the settlement of claims against the sellers, if any. The contingent consideration is an aggregate of up to$3.5 million based on annual cumulative incremental recurring seat revenue over a four-year period, payable in cash and/or equity at net2phone 2.0's discretion. OnMarch 1, 2022 , our subsidiary,IDT International Telecom, Inc. , or IDTIT, purchased all of the outstanding shares ofLeaf Global Fintech Corporation , or Leaf, for cash of$0.3 million , net of cash acquired. We also recorded$3.3 million for the estimated fair value of contingent consideration. Leaf is a provider of digital wallet services in emerging markets currently serving unbanked customers inRwanda ,Uganda , andKenya . The Leaf wallet is a mobile platform available on both smartphones and non-smartphones through an app or by utilizing a USSD interface accessed via a short code. The Leaf digital wallet enables customers to store, send, receive, and exchange currencies on their phones domestically and across borders. The Leaf platform leverages the Stellar network for storing and disseminating transaction data while maintaining value with stablecoins. Stellar is an open-source, decentralized blockchain network that connects global financial infrastructure, optimized for payments and specifically to support cross-border transactions. The contingent consideration is an aggregate of up to$5.5 million based on annual gross profit over a five-year period. InSeptember 2022 , we determined that the requirements for a portion of the contingent consideration payments related to the Leaf acquisition would not be met. We recorded a gain of$1.6 million on the write-off of this contingent consideration payment obligation in the first quarter of fiscal 2023. OnDecember 3, 2020 , IDTIT acquired 51% of the issued shares of Sochitel for$2.4 million , net of cash acquired. We also recorded$0.4 million for the estimated fair value of contingent consideration. The contingent consideration of$0.5 million will be paid no later thanNovember 30, 2022 if Sochitel meets an EBITDA threshold betweenOctober 1, 2021 andSeptember 30, 2022 . Also, pursuant to a Put/Call Option Agreement related to the 5% of the issued shares of Sochitel that the seller did not initially sell to IDTIT, or the Option Shares, the seller exercised its option and onMarch 22, 2021 , IDTIT purchased the Option Shares for$0.3 million . OnJune 15, 2021 , IDTIT purchased 19% of Sochitel's issued shares from the remaining noncontrolling interest holder for$1.0 million . We also recorded$0.2 million for the estimated fair value of contingent consideration. The contingent consideration of up to$0.3 million will be paid if Sochitel meets certain Adjusted EBITDA targets (as defined in the purchase agreement) no later thanApril 1, 2023 .
On
As ofMay 31, 2021 , we purchased a warrant from the shareholders of a VIE for cash of$0.8 million , which is included in financing activities, and a contingent payment of$0.1 million . We acquired cash of$3.3 million from the initial consolidation of the VIE, which is included in investing activities. OnDecember 7, 2020 , we purchased from Rafael Holdings 218,245 newly issued shares ofRafael Holding's Class B common stock and a warrant to purchase up to 43,649 shares ofRafael Holding's Class B common stock at an exercise price of$22.91 at any time on or afterDecember 7, 2020 and on or prior toJune 6, 2022 . The aggregate purchase price was$5.0 million . The purchase price was based on a per share price of$22.91 , which was the closing price ofRafael Holding's Class B common stock on theNew York Stock Exchange on the trading day immediately preceding the purchase date. OnMarch 15, 2021 , we exercised the warrant in full and purchased 43,649 shares ofRafael Holding's Class B common stock for cash of$1.0 million . OnFebruary 2, 2021 , we paid$4.0 million to purchase shares of the EMI's series B convertible preferred stock, and onAugust 10, 2021 , we paid$1.1 million to purchase shares of the EMI's series C convertible preferred stock and additional shares of the EMI's series B convertible preferred stock. The initial shares purchased represented 23.95% of the outstanding shares of the EMI on an as converted basis. The subsequent purchases increased our ownership to 26.57% on an as converted basis. Purchases of debt securities and equity investments were$24.5 million ,$43.2 million , and$22.4 million in fiscal 2022, fiscal 2021, and fiscal 2020, respectively. Proceeds from maturities and sales of debt securities and redemptions of equity investments were$21.2 million ,$26.2 million , and$6.5 million in fiscal 2022, fiscal 2021, and fiscal 2020, respectively.
Financing Activities
We distributed cash of
55
In fiscal 2022, fiscal 2021, and fiscal 2020, we received proceeds from
financing-related other liabilities of
In fiscal 2022, fiscal 2021, and fiscal 2020, we repaid financing-related other
liabilities of
OnSeptember 29, 2021 , NRS sold shares of its Class B common stock representing 2.5% of its outstanding capital stock on a fully diluted basis, toAlta Fox Opportunities Fund LP , or Alta Fox, for cash of$10 million . Alta Fox has the right to request that NRS redeem all or any portion of the NRS common shares that it purchased at the per share purchase price during a period of 182 days following the fifth anniversary of this transaction. The redemption right shall terminate upon the consummation of (i) a sale of NRS or its assets for cash or securities that are listed on a national securities exchange, (ii) a public offering of NRS' securities, or (iii) a distribution of NRS' capital stock following which NRS' common shares are listed on a national securities exchange. OnApril 20, 2020 , our subsidiary,IDT Domestic Telecom, Inc. , or IDT DT, received loan proceeds of$10.0 million fromTD Bank, N.A ., pursuant to the Paycheck Protection Program, or the PPP Loan, under the Coronavirus Aid, Relief, and Economic Security Act, or CARES Act, administered by theU.S. Small Business Administration . OnApril 29, 2020 , IDT DT returned all$10.0 million in proceeds from the PPP Loan. Our subsidiary,IDT Telecom, Inc. , orIDT Telecom , entered into a credit agreement, dated as ofMay 17, 2021 , withTD Bank, N.A . for a revolving credit facility for up to a maximum principal amount of$25.0 million .IDT Telecom may use the proceeds to finance working capital requirements and for certain closing costs of the facility. AtJuly 31, 2022 and 2021, there were no amounts outstanding under this facility. In fiscal 2022,IDT Telecom borrowed and repaid an aggregate of$2.6 million under the facility. The revolving credit facility is secured by primarily all ofIDT Telecom's assets. The principal outstanding bears interest per annum at theIntercontinental Exchange Benchmark Administration Ltd. LIBOR multiplied by the Regulation D maximum reserve requirement plus 125 to 175 basis points, depending uponIDT Telecom's leverage ratio as computed for the most recent fiscal quarter. Interest is payable monthly, and all outstanding principal and any accrued and unpaid interest is due onMay 16, 2024 .IDT Telecom pays a quarterly unused commitment fee on the average daily balance of the unused portion of the$25.0 million commitment of 30 to 85 basis points, depending uponIDT Telecom's leverage ratio as computed for the most recent fiscal quarter.IDT Telecom is required to comply with various affirmative and negative covenants as well as maintain certain targets based on financial ratios during the term of the revolving credit facility. As ofJuly 31, 2022 ,IDT Telecom was in compliance with all of the covenants.IDT Telecom had a credit agreement, dated as ofOctober 31, 2019 , withTD Bank, N.A . for a revolving credit facility for up to a maximum principal amount of$25.0 million until its maturity onJuly 15, 2020 . The principal outstanding incurred interest per annum at the LIBOR rate adjusted by the Regulation D maximum reserve requirement plus 125 basis points. In fiscal 2020,IDT Telecom borrowed and repaid an aggregate of$1.4 million under the facility.IDT Telecom paid a quarterly unused commitment fee of 0.3% per annum on the average daily balance of the unused portion of the$25.0 million commitment. In fiscal 2022, fiscal 2021, and fiscal 2020, we received cash from the exercise of stock options of$0.1 million ,$0.7 million , and$0.3 million , respectively, for which we issued 10,000; 81,041; and 32,551 shares, respectively, of our Class B common stock. In addition, inApril 2022 ,Howard S. Jonas exercised stock options for 1.0 million shares of our Class B common stock that were granted onMay 2, 2017 . The exercise price of these options was$14.93 per share and the expiration date wasMay 1, 2022 .Mr. Jonas used 528,635 shares of our Class B common stock with a value of$14.9 million to pay the aggregate exercise price of the options. We have an existing stock repurchase program authorized by our Board of Directors for the repurchase of shares of our Class B common stock. The Board of Directors authorized the repurchase of up to 8.0 million shares in the aggregate. In fiscal 2022, we repurchased 554,744 shares of Class B common stock for an aggregate purchase price of$13.4 million . In fiscal 2021, we repurchased 463,792 shares of Class B common stock for an aggregate purchase price of$2.8 million . In fiscal 2020, we repurchased 671,117 shares of our Class B common stock for an aggregate purchase price of$4.2 million . AtJuly 31, 2022 , 5.2 million shares remained available for repurchase under the stock repurchase program. In fiscal 2022, fiscal 2021, and fiscal 2020, we paid$9.0 million ,$1.3 million , and$0.3 million , respectively, to repurchase 200,438; 109,381; and 37,348 shares, respectively, of our Class B common stock that were tendered by employees of ours to satisfy the employees' tax withholding obligations in connection with the vesting of deferred stock units and the lapsing of restrictions on restricted stock. In addition, inApril 2022 ,Mr. Jonas tendered 137,364 shares of our Class B common stock with a value of$3.9 million to satisfy a portion of his tax obligations in connection with his stock option exercises. Such shares are repurchased by us based on their fair market value on the trading day immediately prior to the vesting date. 56
Other Sources and Uses of Resources
We are considering spin-offs and other potential dispositions of certain of our subsidiaries. Some of the transactions under consideration are in early stages and others are more advanced. A spin-off may include the contribution of a significant amount of cash, cash equivalents, debt securities, and/or equity securities to the subsidiary prior to the spin-off, which would reduce our capital resources. There is no assurance at this time that any of these transactions will be completed. We intend to, where appropriate, make strategic investments and acquisitions to complement, expand, and/or enter into new businesses. In considering acquisitions and investments, we search for opportunities to profitably grow our existing businesses and/or to add qualitatively to the range and diversification of businesses in our portfolio. At this time, we cannot guarantee that we will be presented with acquisition opportunities that meet our return-on-investment criteria, or that our efforts to make acquisitions that meet our criteria will be successful.
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