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Equity Investments

3 Months Ended

Oct. 31, 2024

Cash and Cash Equivalents [Abstract]

Equity Investments

Note 7—Equity Investments

Equity investments consist of the following:

Schedule of Equity Investments

		October 31, 2024				July 31, 2024
		(in thousands)
Zedge, Inc. Class B common stock, 42,282 shares at October 31, 2024 and July 31, 2024		$	130			$	153
Rafael Holdings, Inc. Class B common stock, 278,810 shares at October 31, 2024 and July 31, 2024			516				416
Other marketable equity securities			53				70
Fixed income mutual funds			4,372				4,370

Current equity investments		$	5,071			$	5,009

Visa Inc. Series C Convertible Participating Preferred Stock (“Visa Series C Preferred”)		$	758			$	695
Visa Inc. Series A Convertible Participating Preferred Stock (“Visa Series A Preferred”)			—				877
Convertible preferred stock—equity method investment			1,231				1,338
Hedge funds			2,878				2,883
Other			2,225				725
Noncurrent equity investments		$	7,092			$	6,518

Howard S. Jonas, the Chairman of the Company and the Chairman of the Company’s Board of Directors is also the Vice-Chairman of the Board of Directors of Zedge, Inc. and the Chairman of the Board of Directors and Executive Chairman of Rafael Holdings, Inc.

In June 2016, upon the acquisition of Visa Europe Limited by Visa, Inc. (“Visa”), IDT Financial Services received 1,830 shares of Visa Series C Preferred among other consideration. In July 2024, in connection with Visa’s mandatory release assessment, the Company received 33 shares of Visa’s Series A Preferred. In August 2024, the 33 shares of Visa Series A Preferred were converted into 3,300 shares of Visa Class A common stock, which the Company sold for $0.9 million.

The changes in the carrying value of the Company’s equity investments without readily determinable fair values for which the Company elected the measurement alternative was as follows:

		2024				2023
		Three Months Ended October 31,
		2024				2023
		(in thousands)
Balance, beginning of period		$	964			$	1,632
Adjustment for observable transactions involving a similar investment from the same issuer			63				(14	)
Upward adjustment			—				129
Impairments			—				—

Balance, end of the period		$	1,027			$	1,747

The Company adjusted the carrying value of the shares of Visa Series C Preferred it held based on the fair value of Visa Class A common stock, including a discount for lack of current marketability, which is classified as “Adjustment for observable transactions involving a similar investment from the same issuer” in the table above. The Certificate of Designation with respect to the shares of Visa Series C Preferred restricts the transferability of the shares, there is no public market for the shares, and none is expected to develop. The shares become fully convertible into shares of Visa Class A common stock in June 2028. In addition, in the three months ended October 31, 2023, in connection with the acquisition of Regal Bancorp by SR Bancorp, the Company adjusted the carrying value of its shares of Regal Bancorp common stock.

Unrealized gains (losses) for all equity investments measured at fair value included the following:

		2024				2023
		Three Months Ended October 31,
		2024				2023
		(in thousands)
Net gains (losses) recognized during the period on equity investments		$	378			$	(917	)
Plus: net loss recognized during the period on equity investment sold during the period			2				—

Unrealized gains (losses) recognized during the period on equity investments still held at the reporting date		$	380			$	(917	)

The unrealized gains and losses for all equity investments measured at fair value in the table above included the following:

		2024				2023
		Three Months Ended October 31,
		2024				2023
		(in thousands)
Unrealized gains (losses) recognized during the period on equity investments:

Rafael Class B common stock		$	100			$	(62	)

Zedge Class B common stock		$	(23	)		$	(8	)
Equity securities unrealized gain loss		$	(23	)		$	(8	)

Equity Method Investment

The Company has an investment in shares of convertible preferred stock of a communications company (the equity method investee, or “EMI”). As of both October 31, 2024 and July 31, 2024, the Company’s ownership was 33.4% of the EMI’s outstanding shares on an as converted basis. The Company accounts for this investment using the equity method since the Company can exercise significant influence over the operating and financial policies of the EMI but does not have a controlling interest.

The Company determined that on the dates of the acquisitions of the EMI’s shares, there were differences between its investment in the EMI and its proportional interest in the equity of the EMI of an aggregate of $8.2 million, which represented the share of the EMI’s customer list on the dates of the acquisitions attributed to the Company’s interest in the EMI. These basis differences are being amortized over the 6-year estimated life of the customer list. In the accompanying consolidated statements of income, amortization of equity method basis difference is included in the equity in the net loss of investee, which is recorded in “Other expense, net” (see Note 17).

In both the three months ended October 31, 2024 and 2023, each of the EMI’s shareholders, including the Company, purchased additional shares of the EMI’s convertible preferred stock. At October 31, 2024, the Company was committed to purchase additional shares of the EMI’s convertible preferred stock in January 2025 for $0.3 million.

The following table summarizes the change in the balance of the Company’s equity method investment:

		2024				2023
		Three Months Ended October 31,
		2024				2023
		(in thousands)
Balance, beginning of period		$	1,338			$	2,784
Purchase of convertible preferred stock			673				672
Equity in the net loss of investee			(438	)			(670	)
Amortization of equity method basis difference			(342	)			(342	)

Balance, end of period		$	1,231			$	2,444