PSFE - Earnings call transcript Q3 2024

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Operator

Ladies and gentlemen, greetings, and welcome to the Paysafe Third Quarter 2024 Earnings Conference Call. [Operator Instructions] As a reminder, this conference is being recorded. I would now like to hand the call over to Kirsten Nielsen, Head of Investor Relations. Please go ahead.

Kirsten Nielsen

Thank you, and welcome to Paysafe's earnings conference call for the third quarter of 2024.

Bruce and Executive Alex are Chief John today Officer; Financial Gersh. me Lowthers, Officer; Chief Crawford, Joining

forward-looking Before materially we conjunction to are begin, the reflect contain actual contained forward-looking management's a cause our factors company's reminder from that and in to statements. and reports. results be that this most should current recent could considered These release assumptions subject in earnings with those SEC statements statements cautionary differ and call statements will and expectations

You not on statements. should undue place these reliance

and Forward-looking non-GAAP as statements them. during of the this contains undertake call measures. financial speak date only of no this we also update to obligation Today's presentation call,

measures appendix the Investor non-GAAP which Bruce. and about With You can on the information of are find turn release available of section to reconciliations measures that, additional call and in today's I'll this in the press GAAP presentation, the most website. our these financial Relations to directly comparable over

Bruce Lowthers

you us and Kirsten, today. for thank Thanks, all joining

Before affected colleagues, recent regions. I the hearts to with impacted U.S. the want were are to I and who And business in thoughts our efforts that in our I by live who saying quickly especially their start support and and the thank to our partners by Florida Southeastern team fantastic want our continuity hurricane. customers discuss quarter, for our employees

excited I'm John new CFO. welcome to Next, Crawford, our

improving of be ask confident stabilizing working year, as our thoughts the the with to John's say been and in John for and I'll move working I more over closely extremely will smooth instrumental with an today's industry. the of end a release, will As XX Alex stay press John next the strong leadership I've share enjoyed Paysafe's we partner brings past him financial through to really as a payments he's you with in the Alex done We valuable with thank that initial sincerely phase into the towards in the him, the read our transition. of with growth. and am partnership X John hello experience his us of years financial than work business background CFO. call. years performance. ensure he's end

our Now let's review results. QX

continued Digital have accelerating growth by to third margin our X% from a constant in prior as EBITDA or investments lower Solutions XX revenue on the actions year-over-year, increasing momentum, Adjusted with basis expanded up making Wallets the while EBITDA points business. reduce X% to first as well adjusted and slightly We X%, revenue $XXX of in higher-quality our to growing offset Merchant $XXX.X XX% million the incremental of interest million our planned was half X% and the basis growing quarter currency XXXX, with year risk year-over-year revenue. compared

range to leverage. said, growth revenue revenue on XXXX growth, year we the and to Additionally, that strategic X.Xx to full reducing the of range we a strengthening QX in in our XX.X% progressively expected higher pleased of execution for highlight net with to financial and the end strong EBITDA net of reaffirm continue business outlook and year results and quarter X% third year-to-date focus With X% adjusted continued on margin are X% quality QX XX%. to XXXX priorities at delivering Overall, focus our leverage. XXXX. with our from our on reducing our the

expectations. or remain the made priorities Slide to on pleased on ahead turn XXXX. remain X our our initiatives as we've I that update for this Let's year progress an with all for track X of strategic of

sales capabilities. the of start expansion our with Let's

initiative, year-to-date, winning schedule. XX last demonstrating and new reaching momentum year, our XXX from welcomed of sales in During meaningfully our up enterprise continued we've the hiring which new ahead cross-selling quarter, booked wins, our we clients. reps, was target On

reminder, a our enterprise merchants across sales reach and and expand both to SMB capabilities critical a is As initiative this merchants.

by Second, sales on the perform enhance our products to our for team our actions $XX portfolio in we $XX of supported better million initiatives, and related year. with to and Year-to-date, to target expected, revenue direct grow generated we continue the optimization, our partnerships. to value-added ahead than solutions of over reach these million we've schedule

Our to some expected tracking our with remaining these expectations in QX. initiatives investments are spend in

efforts. to was acquisition Our third our revamp priority for the year consumer

continues a Our of new the building utilize market goal marketing testing strategies drive blueprint to growth. team scalable user with to

new Revolut reach to their XX we're enabling seamlessly Last accounts U.K. point-of-sale withdraw BXBXC efforts, relationship, bank a from and acquisition our bring we to traditional we've of expanding this our partnerships. eCash announced customers. our also million quarter, in to through Beyond service any Revolut's users with to our collaboration cash XX,XXX locations at customers deposit and Through the partner U.K. their to

XX,XXX over to a expect with months. increase and Revolut to forward coming to X U.K., we through launching unique the first in with the further time collaboration Within marquee with markets. a the along consumers, this in we've look We transacted adoption similar expansion months, other client

our Finally, our up and consumer revenue to sharpened focus small from continues generated numbers, relatively new be introductions significantly compared still last year, experience. on to while product reflecting innovation

our growth. reflecting American merchant a e-commerce, our XX%, represents by year double-digit growth in solid prior business which over industry and by X, revenue portfolio in merchant iGaming on of XX% wins about saw revenue. the grew to performance merchant we Slide Turning led North

lifetime and benefit book ideal grew optimize greater with and We the portfolio of in on with QX, was merchants profiles strength the merchant retention stickier reflecting mainly above merchant with were also continue focus Billable XXX%. revenue and and enterprise QX, customer per clients direct digits in slightly down cross-selling efforts. our our new to value. net our of deals double focus reflecting remains were the our portfolio. on derisking the the mids enterprise see Out investments the existing XX% of driving XX X%, relationships in to those our SMB Revenue booked up

Digital products per all supported to and positive grow saw and year-over-year transactions grew initiatives on revenue X%, In X. XX% user QX, Turning trends by the per average Slide across Wallets we ramp-up with merchants product million active the We consecutive users seventh growth in of both up This in from the year-over-year onboarded of metrics. stable year-over-year. in X.X slightly quarter, acquired QX quarter for X.X and marks user XXXX. the million

here was in with users base user $XX and engagement also active improvement active seeing costs along in with stable and approximately the Our X Again, consumer acquisition million QX. stability we're user at experience.

platform scalable sustainable model enhancing acquisition improve to more I the review that, growth. As I'll we that offer consumer our strategies ask consumer QX our a targeting to With on a supports detail. wallet touched to broader continue while in base earlier, Alex results and

Alexander Gersh

Thank you, Bruce.

to of well primarily margin partly portfolio. headwind increase from reflecting the revenue. X a million on summary a basis. increased constant optimization results. our of Adjusted investment initiatives. the Slide to offset to or reflects $X was X% as basis as Let's EBITDA cohort, of a performance $XX.X points, billion. an product to X% for This a our quarter currency Revenue while move by Total X% and grew EBITDA interest adjusted million related million derisking third year-over-year, XXX XX.X%, year-over-year $XXX.X was Total the from X% client portfolio decline was exits for strong volume growth incremental certain sales $XXX.X revenue quarter, XXXX

expect conversion per and our QX. increase adjusted on investment free which in This tax primarily was basis, declined due which U.S. expected activity $X.X in effective conversion As expense growth from third Bruce $X.XX the mainly On in to to in our of $XXX.X XX% million, to was LTM X% a QX, of related includes share, disbursements an rate. non-U.S. tax Adjusted million This reflects million we million to in entities. the timing have $XX.X totaling last roughly cash the mentioned, due an initiatives $X down EPS recognition was our rate, unlevered remain attributable $X.XX and and flow continued to track, prior BEAT to tax-related line XX% is year. and period. catch-up items and with to reflecting net income the a adjusted U.S. rate, in of quarter mainly into

have this XX%. the catch-up, would been rate approximately Excluding

the Going debt offset interest XX% ETR expense, lower and by of interest lower forward, reflecting in were increases XX%. These we expect partly rates. an range to adjusted

Let's discuss move in to our year-over-year, the $XX.X X% strategic a grew capabilities continued and results. increased Starting actions segment we $XX and billion, reflecting double-digit decline to Slide discussed. Merchant reflecting have growth business to The initiatives year-over-year portfolio initiatives EBITDA the derisk of the X% our of to segment the was as portfolio. our expand million. X remainder revenue increased XXXX Adjusted to optimize our X%, Merchant million, and Growth to within investment e-commerce with led $XXX.X by Solutions, iGaming. XX% strong volume by our driven was sales

billion Turning increased revenue on $XXX.X along and by Digital revenue. Volume lower Slide and X% growth segment products initiatives, $X.X year, XX. solid interest from driven to with to merchants sales million, by the Wallet the last onboarded partially primarily offset X% increased to

points. QX. were XX EBITDA impacts segment EBITDA immaterial exchange adjusted growth Foreign million, basis X%, increase was an expanded to the margin Adjusted in related $XX.X of while

Slide XX. to Turning

focus by strengthen sheet the $X.X quarter. quarter, billion the We $XX balance of net from allocation. debt disciplined debt and million to the total decreased on end our and capital was continue second At

QX of to XXXX. further ratio leverage compared net Our improved in to X.Xx X.Xx

our in solid repurchase business reminder, to As We investing share returning our that the flow in remain have also million shareholders. continue program. will remaining to deleveraging and cash capital $XX we the confident generation enable us a approximately while

results have to EBITDA strategic XXXX, are revenue which call. maintaining Moving for XX. on last our updated our on progress to outlook and and Slide we full year earnings guidance date, on adjusted Based our we

revenue reflects year. to initial $X.XXX billion than year in guidance our the higher of the billion, range full reiterate, beginning $X.XXX XXXX which to to is guidance of provided reported at our the Just be

XX% We EBITDA and recently for $XXX X.XX million, reflecting to lower. continue averaged quarter-to-date between adjusted I'll million X.X exchange in has to $XXX expect margin EBITDA to in between that to USD rate to EUR XX.X% QX the QX approximately trended come note adjusted and

every given mix, the an the geographical annualized. million weakening $X of million X% has revenue on versus As approximately of impact our to U.S. a dollar unfavorable Euro reminder, $X

year. continue want to expect to Lastly, that net between the X.Xx be at reiterate to and we the leverage our X.Xx end of I

want contribute were and and I broader improve my of express to am had while So finally, at to company's collective to our opportunity effort, ahead to reducing transformation. And welcome stronger results we've schedule. grateful achieved debt the these a to gratitude financial also and a I I've Paysafe. John performance Through my the leverage. that able colleagues quarter we for

John say the to call Now I'll a over turn to words. few

John Crawford

dedication and opportunity coming and had years Since board, with the very across impressed end had Thank I've this outside teams it to brief. I'm knew interesting on many their I've drive be multiple our assets, I'll you, and for from Alex, meet the combined markets. business succeed. with locations, following attractive been to and

the help can shape priorities add to great and year out success. areas I and A in we the observations me, quality for early and will beyond. of people, formula and of these next that's for Now opportunity out close prepare this year stand few my as a

got efficiencies too meaningful achieve we systems, we've many First, and have there. to ability the

Second, I generate better internal believe to and for improve can Paysafe. our capital for value returns more customers we allocation

drive unlock turn Finally, thrilled to And to with drive margin. wrap will build I to the Bruce. as new and and will progress over I discipline opportunities we team focus I upon am Bruce the back that, and up, the with scale on date to to operating continue cost leverage. partner call to and growth to To

Bruce Lowthers

Thank you, John and Alex.

beyond. work highly in we I team on drive the higher X% that growth. everyone thank At persistent sustainable and Our the dedication showcases performance to hard taking XXXX, priorities for investing growth quality, execution and in momentum our on and throughout right I future net throughout want revenue continued focus year-to-date, our and this same remain reducing progressively revenue we're leverage. their actions time, the to delivering Paysafe confident on are continued XXXX including our turnaround.

our the And getting over better couple now we we last focus and our on path have work has each next the as do, to of we to exciting to While of progress remarkable quarter, have a continue clear chapter more journey. years. been

our are that, weather. will We open own for questions. line we With making your the

Operator

Andrew BTIG. first question from Instructions] with The Harte [Operator comes

Andrew Harte

talked the Bruce, in including the efforts of benefit same ahead past, efforts portfolio year. $XXX million benefit $XX we you about yield I revenue about this million schedule, talked optimization know of those being in the about XXXX. should

been contribution the of optimization the ahead the is about revenue what key case? of So that we How be to still should And thinking those to in schedule has year? next efforts portfolio some date? be

Bruce Lowthers

like against Look, progress initiatives. great the we X feel we're making

of $XX in ahead the to of we it. with on as we're a or those your different on little track the But we a with Each next positive that think each have we spin year, outlined. that. million, little prepared we remarks, really bit calendarize said on there specifically I question When bit them. against see trending number we're growth solid for that as

have good margins have as reducing here QX today, we what to and the where be. year But and of excellent 'XX. going. of next As to really visibility don't unlike want we're as net revenue accelerating we ahead past today, growth outcomes leverage EBITDA we discussion years move sit our we ourselves. our into I get is usually will visibility into now

that. about we very So good feel

hiring. is that we a other little about the bit the think I talked thing

hiring So we're the on people. ahead XXX

more it's So That year out in probably a as really worth million within we're little a think but we investment going of good that front off into it that it, originally maybe pay and another planned. move team growth at and spins look we because we 'XX dollars at performing sales year-over-year, 'XX. of this as quarter what we the that's than probably a organization we our see of couple high is from to level,

quarter are are decisions we talked a these and longer-term about output. driving ago, a As outlook that

are very about And right the confident so be to company track we and for the thing feel these on doing.

Andrew Harte

out base partnership, about eCash with And that transacting XX Xx the I think in Revolut the of users the million a on then globally into U.K. called partnership about there's the Revolut And you users. XX,XXX

be other what's regions expanding and for well? with guess I Revolut line U.K. to expectation what with your those So the ramp the customers as into could time

Bruce Lowthers

item think to through growth to continue us. nice I be going 'XX. you'll see It's a expand that for

as Bank the saw well, partnership Deutsche we think week. probably prior as well I last you announced to call the

larger So we base. client have another similar one with a much

landscape. leveraging really So we a in merchants is European have over new got this Europe. XXX,XXX mind, that Keep in initiative the the assets we've across

opportunity of cash one unique essence, withdrawal historically, our is any we've done So different allowing really something this for deposit a great Europe. retailers than in and to us at what and do for across

about optimistic there's continues here. very this to think we're and So how room lot go a more we

model. other institutions I and to look think we'll to this add type of continue to sign

Andrew Harte

remind this off, that And versus we're And frame the can should merchant rolling to just or the for the me. merchant how Alex, versus thinking rolling about help as in up ISO about higher-risk then those with just quarter channel last gross thinking mix, merchants especially longer term, one see e-comm higher-risk us it it mix? did the then you it pertains margin margin we with customers direct impact gross we when us off? thinking forward be

Alexander Gersh

first were sustainable. the but On we yes, they question, they're not said definitely, high margin,

on course, the to see our about focus be really the we What's gross you happen see predict little we way it, it the you'll on EBITDA. he's of you focus with on gross EBITDA continue To margin, way it focus to point. that terms you, about to of it's gross how on John and a and honest our should this efficiency hard And about to so think Overall, on And on to higher. to margin, margin as margin. revenue. bit said, you, drive we think see margin EBITDA it, the try think going it to I in going revenue at

Bruce Lowthers

half expansion the in talked XX half that in the margin year that We year. in coming basis said EBITDA I margin half front of points with the as of would the we the the would see from acceleration front prepared from as margin into we half front just back about our to of add, half. the back the remarks year year, the well to the

like And we we're exceptionally to optimization we portfolios the as So said some margin we in and said. year, move feel expansion expansion, great into the earlier of navigating see we're executing position, 'XX. well, as of a as our in we margin

view as today. changed here none that our sit we has So of from

Operator

from of next The is with question Trevor Jefferies. Williams the line

Spencer James

bit wanted just 'XX, have to really ask initiatives the a in far of the for lot pay appeared to playbook of I preview a of a FY 'XX FY given off. so

of we year if if a curious or priorities? next look should So will same a like the bit of more investment in expect shift

Bruce Lowthers

clear 'XX. think 'XX. on what be I we necessarily I what what earnings going do we'll when a for 'XX path. year, the cool up we in have to will similar with we think have do we next our be X have already or is to you'll that But construct doing March, we'll slide is call candidly, where this a set have 'XX. in don't I will probably initiatives But what for We'll think X we're working sharing 'XX have see team we on a that

is much that against point. few particular think I on very executing this drive So established projects We're projects taking a will just the those well outcomes. at playbook

getting And the focused as that. start on I identified. projects are so good we're very here about And to feel them we pretty 'XX. and in a We're said, already off good working

us on too 'XX view start a yet, to but and have sharing a So there far where a we path going. just we're out definitely little just is for

Spencer James

next was maybe? mix health in of wondering And within then on if shift year? growth the any opportunities And of on maybe just achieving update as context of a for pipeline provide just you pipeline an the thoughts follow-up, I could the targets the

Bruce Lowthers

is Look, really strong. our pipeline

growth within enterprise side, seeing for growth, year. what those before. a double had numbers. basically XX solid enterprise solid we the the really It's On really deals We're year

are about what the feel and And sales so doing. very team Rob I good

emerge to is starting there. to I think good together. seeing come organization initiatives We're starting the product

at sit very looking 'XX that said have at pipeline, as we confident how up looking our pretty are we 'XX. we already. feel Like I visibility coming is shaping for good the into things before, So

that. confident about feel So

Operator

The Research. is the next from question Paul with Wolfe line Obrecht of

Paul Obrecht

great progress expect sales at in just ramping rate to productivity? goal the that reached you these ramped of hires It's organization. XXX see to normal Can run a fully and of to the you've adds them be touch on you new the when

Bruce Lowthers

Sure. that. do Happy to

our some we about generally about of takes get is may fully to X team sales talked ramped. what as you So recall, enterprise months

board in into on they at 'XX, driving the hiring the sales faster. online opportunity look really When you 'XX. quicker really impact our more accelerating SMB So maximize them can we is so little getting that a get about organization,

So they're getting online months. typically within X, X

a channel, And quicker ramp can there. so And right the the look the we we our share expectations SMB probably I the both enterprise slightly. enterprise What is probably little at would say far expectation. on outperforming is so SMB team as and

put months. Just the a team little to bit, context in we of few sales the basically it have in doubled last the size

So things. team like absorbing, onboarding, on lot of on be a a that and feel track. it's all through to lot progressing there's and that very But with we're is doing good worked I a overall, that, think we the training job processes had those

Paul Obrecht

are can some then as that And a mainly last And quarter. the seeing decisions what exit to the you're your of like XX% risky decelerated what around merchants? going follow-up, on forward? of Is you in it just direct to this and expectations part provide from color looks portfolio SMB reflective X%

Bruce Lowthers

we where the start emerging as market as we what regulatory company. being had proactive standpoint, of we saw decided been as at a going, instead a being looked and reactive to Look, historically we was Yes. from

risk we associated the to were that decided certain wanted that we there longer be were no with. So of highest merchants

was we growth our decline. this those we our Internally, gave we're still prune the of we same-store the at and number is from the off significantly ahead are of of the some what that start sales, midpoint we the and keep the walk, year. look And So the was at latitude to be is us of merchants sales, above very, nicely, very laying taking thought mind, those where advantage a fact started that portfolio that's point, portfolio. the in things some what driving of progressing and revenue it started the to would our new at driving as we the SMB

we of original around over and that above the the when change, to was given X the growth. obviously of expectation as look X% revenue going midpoint at be we've guidance We're year. So just for

and 'XX. year. for ourselves transformation up We're a solid great a making the of a it's in lot progress So setting good

Operator

next Instructions] [Operator The of Chiodo with UBS. Timothy is question line the from

Timothy Chiodo

opportunities. I highlighted short-term as you your for wanted working the And It's to million saw loan commercial lending capital see revenue. partners. by an last customer. are you ahead for touch services on quarter, integrated support to $XX a of being highlighted program Jaris XXXX value-added your And we Paysafe encouraging

take So or could you impact can any you highlight? expand other you could value-added economics on this unit rate partnership? services And any that on share

Bruce Lowthers

a are base, theirs. program got XXX,XXX to got the world, merchants. we've our client program at of we've that we Yes, a loan The you is as partner close around great look aggregate in

us lot to loans a sense. So of makes offers capital for have that working program a

that from or underwrite or of deal see This standpoint, this we that arrangement a risk I is something on. something any we is take referral with with just have not that type them. origination think you'll our

that we of we're I go to we others operating markets mix the that different forward, geographic add think respective in. as will

just beginning. I the is think this

us solutions. see you'll a of think offer I other number large

of knows, resellers everyone Clover, sell of Clover. we the one a of probably largest As lot

merchant the You'll that services side. that of trying At adding to best acquiring run business see the they of on do provide opportunity And our our that's we're we're the start to the to day, the take end where do on to really ancillary can. merchants. we're more more what what really programs is the merchants and trying their to more

Alexander Gersh

yes, Solutions is QX bit. business you Merchant add, confirm, in rate, year of take And this look just a of QX if at up year just versus last to our to the

Timothy Chiodo

I on Clover. follow to also up wanted

it. mentioned you glad really So

by overlap potential So merchant by Clover related about to we your on services side? distribution Clover, of of offered the and the value-added Paysafe how think should

Bruce Lowthers

great ours. is products work I We product question. distribution and a Look, our products bit a customer partner of expand ideas a combined on innovation great Fiserv quite with of the entities' them that how say base. to and on that's to would Yes, their

we And of So from sell very front very we opportunity to in the expand to good that feel the us. Fiserv expanding the into good we the feel products continue about opportunity us market. about

think it's be to we'll we here continue something into pushing on I So 'XX. as move

Operator

there hand As now I to Lowthers, like are over no CEO, questions, to closing further the conference would for Bruce comments.

Bruce Lowthers

and Well, thank for I We of everyone saw the a joining obviously, us. to everyone, from margin want to you, thank, front the you, quarter. great growth. Again, thank here reminder, at X% Paysafe for a half expansion just QX. year

X.X%, excited Alex advance. needs full leverage in the a So reiterated meeting again, quarter to year our about coming It to We're about excited that. net full on, be down obligation ratio touched that. really as already

quarter So and top with really for strong bottom a line us and reduction. solid net leverage

thank very So today. you appreciate dialing much. everyone in I

Operator

Thank you. concludes teleconference. today's This

you this for disconnect participation. may at time. Thank your your lines You

Paysafe Limited (PSFE) 13 Nov 242024 Q3 Earnings call transcript