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spk08: Good morning, ladies and gentlemen, and thank you for standing by. Welcome to Newgate Corporation's fourth quarter 2023 earnings call. As a reminder, this conference call is being recorded. I'll now turn the conference call over to Chris Mimone, head of IR. Please go ahead, Mr. Mimone.
spk05: Thank you, operator, and thanks to everyone for joining us this morning. With us today are Philip Thayer, chair and CEO, and David Schwartz, CFO. As a reminder, this conference call is being recorded in webcast and is copyrighted property of New Bay. Rebroadcasting this information in whole or in part without written consent of New Bay is prohibited. Prior to this call, we published a shareholder letter for the fourth quarter and full year. We encourage everyone to read it if you haven't done so already. The shareholder letter contains commentary that otherwise would have been included during our prepared remarks to this conference call and allows us to spend more time on today's call answering questions. We would also encourage investors that the shareholder letter be read in conjunction with our press release, MD&A, and consolidated financial statements, all of which are available in the events and financial information sections on our investor relations website, investors.nuve.com. During this call, we may make certain forward-looking statements within the meaning of the applicable security laws. Such forward-looking statements involve risks, uncertainties, and other factors that may cause actual results, performance, or achievements of the business or developments in New Bay's industry to differ materially from anticipated results, performance, achievements, and developments expressed or implied by such forward-looking statements. Information about these factors that could cause actual results to differ materially from anticipated results or performance can be found in New Bay's filings with the Canadian Securities Regulatory Authority and on the company's website. Our discussions today will include non-IFRS measures, including but not limited to adjusted EBITDA, adjusted net income, and adjusted net income per share. Management believes non-IFRS results are useful in order to enhance our understanding in our ongoing performance, but they are not a supplement to and should not be considered in isolation from a substitute for IFRS financial matters. Reconciliation of these measures to IFRS measures is available in our earnings release and MDMA. We'll just have some brief prepared remarks here before opening up the call for your questions. In order to get to as many people in queue within the allotted Q&A time, we ask that you limit yourself to one question and one follow-up. And with that, I'd like to turn the call over to Phil.
spk12: Thank you, Chris, and thank you all for joining us this morning. As you've now seen, we've reported strong fourth quarter and full year results near the high end of our range for revenue and above the range we provided for total volume, revenue and constant currency, and adjusted EBITDA. Highlights for the quarter include strong growth across the board, with total volume increasing 53%, revenue increasing 46%, and adjusted EBITDA increasing 40%. On a performa basis, fourth quarter revenue growth was 11%, and in line with our expectations, our leadership and challenger positions across our end markets drove 19% growth in organic total volume accounts and currency. Adjusted EBITDA margins expanded sequentially by 100 basis points to 37.3% as we were driving efficiencies throughout our business. In our capital allocation, we continued to prioritize debt repayment, deleveraging to 2.5 times as of December 31, 2023. Our board has authorized and declared a cash dividend of $0.10 per share. Since 2022, we have returned $251 million to shareholders in the form of share repurchases and dividends. This year is often an exciting start as we are executing on our strategic priorities. We're looking forward to another year of growing with our customers, driving product innovation, and expanding our geographic footprint, all the while staying disciplined on cost management. This concludes my prepared remarks, and we're now ready to take your questions.
spk07: Thank you.
spk08: I'll now be conducting the question and answer session. If you would like to ask a question, please press star and then 1 on your telephone keypad. A confirmation turn will indicate your line is in the question queue. You may press star and then 2 if you would like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. The first question we have is from Will Nance of Goldman Sachs. Please go ahead.
spk09: Hey, guys. Good morning. Appreciate you taking the questions. Phil, maybe just a question on some of the moving pieces in the segments. You know, I think the S&B business had a nice improvement, I think, in the shareholder letter. You mentioned, you know, finding ways to kind of improve the performance. So just, you know, any color on some of the opportunities that you guys have uncovered more recently there. And then, you know, I thought it was interesting to see kind of like the Heritage Paya business growing at high teens. You know, it's a nice acceleration from what it had done historically. So just any color on what's been driving that. And then, you know, maybe any color on the till payments. I think you mentioned that was kind of geared towards international expansion on the ISV business. Maybe just thoughts on the strategy there. Thanks.
spk12: Thanks, Will. Good morning. Great questions. You know, as we stated, we're investing in all of our channels. We're really excited about what they provide to us. If we double click, global commerce grew volume by 30 plus percent, which we continuously believe that is category leading. We've made investments and executed our thesis around our B2B government and ISV channels. If we look back, that went from 13%, 16%, and 19%. And we do believe our SMB is going to remain relatively flat and certainly driven the performance of our business with the continuous momentum that we see in our global commerce and B2B ISV channels. With respect to Till, very excited to welcome the Till team to New Bay. A real small but killer business with very exciting capabilities with respect to engaging with ISVs and ISV partners around the world. Fantastic onboarding tools for seamless and instant merchant onboarding, great partner tools and APIs for us to accelerate our ISV strategy. It is growth accretive in our B2B, Gov, and ISV channel and certainly drives a footprint for us to accelerate ISV engagements around the world. What's interesting about Till, while small on acquisition, big on the capability, and certainly will be very interesting for us as a platform for continued growth. They have relevance in Australia and New Zealand, but also in the U.S., just about 50-50 with respect to where they're focused today. Wonderful team. Certainly margin diluted initially for the first couple of quarters. We believe we'll bring it to break even by the end of the year and will be accretive in the years to come.
spk08: The next question we have is from Darren Piller of Wolf Research. Please go ahead.
spk03: Guys, hey, thanks. You know, Phil, in the prepared remarks or really in the shareholder letter, if you talk through the rigor you applied to guidance, maybe just expand on that a little more in terms of what you actually included in terms of conservatism and the outlook. And then I think as a follow-up, just understanding the acceleration a little better, just the moving parts of the driving forces of that acceleration as the year progresses to exit the year in that 15% to 20%. would be a great place to start. Thanks.
spk12: Yeah, absolutely. Good morning, Darren. You know, the biggest thing for us is we want to set ourselves up for success, Darren. And that is really what is reflected in the guidance. We took a prudent approach. We want to remain conservative. We're quite excited to how this year has started. but we've used our typical building blocks with respect to what we see in the business, what we see from a new customer, a very active pipeline, but being conservative on activation timelines from customers to essentially provide what we think is a better engagement with our shareholders with deeper visibility. With respect to the exit of Q4, very good momentum in all of our channels, keeping in mind that we lacked in global commerce the World Cup, which was a significant event the previous year. And in the first half of the year, we're taking consideration of lapping the off-boarded customer. We have taken some thoughtful views on timing for new customers and most certainly thoughtful views on wallet share expansion opportunities, which we're excited for. With respect to starting the year, we're seeing great momentum in January and February. We're seeing really strong engagement with customers, both existing and new. And we feel like this year will be a another transformative year for New Bay. From a building blocks perspective, we're building it slowly. So organic growth building throughout the year while we exit Q4 in the range of our midterm growth targets.
spk08: The next question we have is from Sanjay Sokrani of KBW. Please go ahead.
spk02: Thanks. Good morning. Maybe I could just drill down on Darren's question just a little bit, Phil. You know, when we think about that $100 million of revenue in the pipeline at the end of the second quarter, how much of that should translate into revenues as we move through the year? And maybe you could just talk about how much of the new wins are sort of baked into the 2024 guidance.
spk12: Yeah, without double-clicking on a customer specific, I think the most important thing to remember is when you sign a new customer, Sanjay, that's the implementation timeframe, right? It typically takes six months to a year to see the full volume, just depending on how many countries and how long they have from an implementation standpoint. So historically, what you do in the previous year or actually in the year is gardening for full implementation the following year, provided that the customers went live throughout that period, if that makes sense. So we've taken those historical trends into consideration for the year. We have a really deep pipeline. As you mentioned, many of you have seen the press releases that have come out with companies and partnerships with Adobe or our win with Microsoft or, you know, us establishing a real foothold in the travel space, expanding greater in the retail space with some of the global retail pioneers. So from an overall perspective, very excited about what we're seeing. Implementation is, um, something that we have focused on last year. We have changed the way we manage client onboarding, created tiger teams to drive, um, you know, attention to all the relevant departments for client activations and that has started to yield results. So I think all in all, putting it all together, the building blocks for us remain the same, you know, certainly, uh, what's happening in the end markets. Um, so GDP related and markets that we're operating with both B2B, gov, ISVs, um, and global commerce. We have the wallet share opportunities within our existing customers, which are fairly significant as our customers execute their own journeys and utilize our capabilities to grow their business. There is the annualization of the previous year's new business, the ones that have activated, and then net new business, which all combined, we've taken a fairly conservative approach with respect to the outlook that we provided for 2024.
spk02: Got it. And then just on a related note, I know you had like these cost synergies from Paya as well as other initiatives like insourcing the backend processing. Could you just talk about sort of this timing of that and does any of that sort of factor into the guide for 2024?
spk12: It does not. So if you remember Paya, we talked a lot about synergies by the end of 2024. We're really comfortable with the synergies that we've executed so far, both on a cost perspective, but more interestingly on a revenue perspective. We have left backend as an upside to margin expansion for this year. And the reason being Sanjay is that backends are never all in one and done. So, you know, certainly we plan on the migration of Canada within the second and third quarter. Thereafter, we'll look at the migration of the U.S., That has enormous benefits into the organization, not just the cost perspective from third parties, but also internal process efficiencies, meaning that we have one process for onboarding, one process for data, one set of data that comes back. And then we have the element with respect to wallet share opportunities. So on our own clearing and settlement, we do interchange predictions. which is materially different from how many of the North American operators and processors do it today, meaning that we can price transactions in real time. And that opens up a world of opportunities with our ISVs and reselling partners because we can pay them daily. We can pay them weekly. We can provide merchants greater depth on cost analysis and reporting for them on a per transaction basis in real time. So it's very, very important. But we have left that as an upside opportunity. It's predominantly going to be for 25. However, we will see minor implementations and testing as we are doing right now. We are live in Canada with a handful of merchants and pretty excited about what we see. So overall, from what we've baked in from an initiatives perspective, we've kept a very conservative view. We have upsides on our backend. We have upsides on debit routing capabilities, which is going to be specific around Paya. And then we have just general scale opportunities within the business. We have taken an approach late last year, and this is from my entire executive team, to explore AI opportunities before we create the requisition for new hires. And this is yielding wonderful opportunities for us to continue driving greater efficiencies across the org. Don't mince that for headcount reduction. It's more opportunities as we continue scale to continue driving and enabling our workforce to do more and be more efficient and help margins expand to our long-term targets over time.
spk08: The next question we have is from Dan Perlin of RBC Capital Markets. Please go ahead.
spk04: Thanks. Good morning. I wanted to ask a question. It feels to me like the... you know, the sales motion, almost like the go-to-market motion has been accelerated. And I think we also saw that kind of an indication in the current quarter. So I'm just wondering, are there some nuanced changes that you've been, you know, pushing in place? I know you're talking about implementation teams and tires, but this is kind of more the forward sales motion. And then the second part of the question is a little bit different, but just expectations around gross margins, you know, as we think about into next year, given some of the mixed dynamics that are at play in the business. Thank you.
spk12: Yeah, thanks. I'll take the first question. I'll pass it over on the margin side to Dave. From a sales motion perspective, if we just double click on what we did last year, you know, last year we created our sales enablement group, wonderful team that has created real structure around our global commercial operations. And we mean by that is, you know, if you can have 200 sales folks sell one way versus 200 folks sell 200 ways, creates a lot better visibility into the org and the performance that we are seeing from the headcount that we have. And From an ROI standpoint, the commercial team has become really attractive with respect to cost of acquisition, certainly understanding the time of implementations we shortened. We've also added an SDR team, which is now our breeding ground for talent as we continue expanding to it. And we think that there is an opportunity, certainly keeping in mind the margin of the business, to continue expanding our sales capabilities. We're very excited about what we see in our global commerce. If you think about it, volume growth of over 30 plus percent. Certainly, we're lapping the off-boarded customer and World Cup, but it's a fascinating business, guys, with so much opportunity in so many different countries. Even at our current scale this year of touching $250 billion in volume, we still have so much more to go. We really like where we're sitting, both in global commerce and and in our B2B, ISV, and GOV. Wonderful job from the team from a sales motion aspect to energize our B2B group. We feel that this can be another significant lever for growth for us in the business. We have accelerated our government business as well, and we are putting focus this year on ISV. Thankful to have Till as part of this, both from a capability perspective and a leadership perspective. and all combined just gives us the tools to continue transforming the business into the player that we are today and the one that we're going to.
spk01: Hey, good morning. Good morning, Dan. It's David. So as it relates to gross margin, it's a good question. I mean, it's really dependent on mix of course, and what we, you know, how we roll out and the relative mix within market markets. But what I'd say, if you look back at the last, you know, eight quarters, the range has been really, really tight from a gross margin perspective. It's ranged from about 77% to about 83%. So the range has been really tight. The last two quarters sequentially, we were at that 81.7%. So pretty much flat. And the quarter before that Q2 is 82%. So I'd say the variability, you shouldn't expect much variability, but of course, dependent on mix and look, as we drive expansion from a wallet share perspective with existing customers, That always helps, but then there's some offset, and you think about as we go up market to larger customers. So there's many puts and takes, but ultimately we haven't seen much variability, and I wouldn't expect to see any significant variability on a go-forward basis either.
spk07: Great. Thank you.
spk08: The next question we have is from John Coffey of Barclays. Please go ahead.
spk00: Hi. Thanks. Thanks, Phil. Thanks, Dave, for taking my question. My first question is on revenue cadence. So given that you guided for Q1 and for the full year and also saying that you might leave 2024 at that 15% to 20% level, I was wondering if there's any insight you could give us into what the cadence would be revenue growth-wise over the year? Because you know a lot of the ins and outs as far as that large customer leaving. So any kind of insight you could give us there? And then my second question is, As I understand, I don't think Brazil is open for gaming yet, but it seems like from what I've read, that might be happening soon. Is there any kind of view, if not sizing, that you could give us on what you think the Brazilian gaming revenue opportunity could be for you? Thanks.
spk01: Good morning. I'll take the first part, then I'll pass it back to Phil for Brazil. On the revenue cadence, so I guess what you'll see, there's a few factors to think about, especially... in the first quarter and the first half. So in the first quarter, certainly we'll expect strong revenue growth, you know, 26 to 29%. But that's really driven by, of course, you know, full quarter of PIA in 2024 and only partial in 2023. And then as we get into Q2 and the rest of the year, you know, PIA will be, it'll be comparable on a year to year basis. The other factor to think about is, for sure for the first half and slightly into Q3 is really around the customer grow over. So that's a headwind that we're facing. And then high level, what I'd say, if you kind of think about it from an organic perspective, kind of think about mid to high digit growth, first couple of quarters, and then kind of low double digit into Q3. And then like we've said, exiting Q4, you know, in line with our median term target of 15 to 20%. So there'll be a ramp throughout the year as we go, partly because of some of those headwinds I mentioned and just the dynamics around Playa in the first quarter. But that's really how we see it. And we think that we've set up our 2024 for success, and we want to make sure that we execute.
spk07: Thank you.
spk12: I'll take the second question. You know, gaming is a global vertical and it, uh, it is part of our ethos to make sure that we support every new market that comes online. So we are focused on multiple geographies that, uh, that have pending legislation to enable gaming. LATAM as a whole is a big gaming opportunity. Certainly Brazil is topical for our customers and one that we are gearing up to supporting from a size of market perspective. Um, We try to stay away from individual markets for gaming. We look at it more holistically from a customer perspective of where their journeys take them and what opportunities that drives for our customers. We do think it's topical for our customers and certainly something that they are investing into, but not just the only market, if that makes sense. I wouldn't just double click on saying one market. It is a new market that's coming online and it is Certainly a top of mind for our customers, but over the last three or four years, there have been several key new markets that have enabled, including everything that's happening in the United States and last year in Canada. So there are a lot of tentacles for additional growth in that end vertical, Brazil being one of them, yes.
spk07: The next question we have is from Rufus Hone of BMO Capital Markets.
spk08: Please go ahead.
spk14: Very good morning. Thanks very much. Maybe coming back to the EBITDA margin trajectory, you've got this target out there of 50% plus over the next five to seven years, and sort of implies a couple hundred basis points of margin expansion each year. And just given where you've guided to for 2024, slightly down margins year over year, how should we think about the margin ramp going into 2025? Is there going to be some kind of margin catch-up? Just how are you thinking about that? Thank you.
spk01: Yeah, good morning, Rufus. So I think we talked a little bit about it, but we can drill down a bit more. So when you think about, you know, margin and what the impact is, we'll talk about, I guess, 2024 first, then we can kind of go into 2025. So, you know, exiting a full year of 2023 at 36.8%, our outlook, as you saw for the full year, 36 to 37% range. There's really a few core, I guess, building blocks that you think about from a bridge perspective. One is around till. Like Phil said earlier in the call, it's a business that we're really excited about. It brings us capabilities on the ISP side, but it is early stage, high revenue growth, but there is a drag from an EBITDA margin perspective. So that does have an impact in 2024. Again, we plan to exit 2024 with till at break even or better. So that's one component. The other component on the downside is the customer Grover that we experienced late last year. So that's going to be an impact certainly for the first part of the year. And then the offset to that is really around scale. So as our business scales and we are at scale, but as it continues to scale and as those two items lap, it really sets us up well from a margin perspective. And that brings us kind of to the 36% to 37% range. Then there's the upside that was mentioned earlier on the call around the various initiatives. And I've still touched upon some of them. You know, there's back-end insourcing. There's the overall cost-savings initiatives. There's playa synergies. What I'd say is, you know, on the cost-saving initiatives, in addition to, you know, what we've tasked ourselves to do on the AI front, is also just looking across the board at all of our costs, looking at vendors, trying to understand, you know, where the opportunities are from a vendor consolidation perspective, from a pricing perspective with vendors. And so we've taken a prudent approach of how we think about execution on those. We're really driving them hard. I think we mentioned on the last call that we do have a tiger team that we, you know, weekly are looking at costs and I think we're driving the organization and making sure that that culture is instilled across every level within the organization. We've taken a prudent approach in terms of what we have baked into our outlook. I'd say, you know, there's much more upside than what's baked in and we're executing. Will we achieve it all that we've laid out? No, but our team has been really, really thoughtful and great around looking under every rock to just say, hey, what about this? What about that? And so we're really, really driving the execution on those savings. So I think that's another part of the upside that, you know, can help drive us towards that EBITDA margin expansion into 25 and beyond. And I think you've seen over the past three quarters, we have had good margin expansion. And I think that's something to consider too about how we can leverage the revenue, leverage the scale to drive towards that 50 plus percent target. Great, thanks.
spk07: The next question we have is from Richard Say of National Bank.
spk08: Please go ahead.
spk15: Yes, thank you. Just wondering if you could maybe elaborate a little bit more on your acquisition strategy. So should we think about this as you're looking for solutions to expand geographies and I guess sort of related, was Till just opportunistic given sort of the valuation of that asset?
spk12: Good morning. You know, our base case, as we've talked about for the past few quarters, from a capital allocation perspective, is debt repayment. So our leverage profile has changed. Our cash flow generation is extremely strong and that is our base case. And that's what we should think about. We really liked till as it ran through the process, we liked the capabilities, but just as a background for the process, we weren't there on price and or on price expectations. We did give our best and final. And as you guys could see, it was not a significant acquisition just in the size of our overall business, but the capabilities were very compelling. So we have a lot of rigor. I wouldn't expect acquisitions as we stand today to be our priority. It will be much more focused on debt repayment, but we will remain opportunistic until it was exactly that. The more we dug, the more we found relevance to our business. We love the team. We think this is additive to our B2B ISV and government strategies. And we do think there's tentacles of opportunities around our SMB as well, specifically around the simplicity and the cleanliness that they have around merchant onboarding that's relevant for our businesses. So from a capital allocation perspective, base case is debt repayment. We're very fortunate with our free cash flow profile. Our business has hit another inflection point as we continue scaling. And this is just going to open up opportunities, both with respect to potential opportunities for future M&A, but more importantly, just improving our leverage profile over the next few quarters.
spk15: Okay. And my follow-up question, you talked about wallet share increases. I don't know if you can sort of elaborate on this, but perhaps you can maybe talk about where you're getting the most share from.
spk11: It just depends on the area. There's not one particular folk that I could highlight.
spk12: It just depends on what merchants are looking for and what solutions we offer. We compete against great companies. If you think about some of our large global peers, we've established the position. We're a substantial player today, and that allows us to earn our fair share driven by our technology stack and the flexibility that we've embedded into it. So it depends on the region. It depends on what merchants are looking for. You know, certainly from a global commerce perspective, there are five major competitors and we compete really well on feature functionality and capability. And ultimately that's what's driving that 30 plus percent growth in global commerce and 19% for the overall organization.
spk07: The next question we have is from Richie Smith of JP Morgan.
spk08: Please go ahead.
spk10: Hey, morning, everyone. This is Charlie on for Reggie. You've announced a number of marquee wins over the last couple months. I was hoping you could step back and kind of compare 2023 to 2022 in terms of how these deals are stacking up against one another. Are there any appreciable changes in the size and scope of new deals? Any demand or changes in demand of specific services or offerings? Thank you.
spk12: Great questions. So if you think about it, 2022 is the onset building blocks of our global commercial team that we started building in 21. I think the machine is becoming really well oiled. So it's just the journey between building a commercial organization. I would just a side note, preface that, you know, technology is great, but you need a commercial organization to enable it and scale it. And that's really where we have been investing into yes continuing the momentum in our feature and capabilities as we've highlighted you know 40 plus capability enhancements in the fourth quarter alone but it's all about bringing it to market you know screaming on top of the rooftops of your solutions and making sure that customers hear you and consider you and and that is really what the transformation of the business and driven the transformation of the business between 21 22 and 23 um Pipelines are also, in global commerce specifically, never over, if that makes sense, right? Sometimes you can speak to a customer for years, depending on where they go. Sometimes it can be for a quarter. Sometimes they're running an RFP and all scenarios in between. But our pipeline today, what's wonderful about it, it's not just the size and depth of it. but also the end markets and customer profiles, you know, from winning Microsoft to partnership with Adobe to the partnerships that we've seen across the board. And you guys have seen just the level of PRs and activity that's coming through. We are going from very much, if you think about five years ago, a single vertical focus to, um, our capabilities now in seven or eight core verticals and new use cases with respect to B2B, ISD government, and new end markets in our global commerce team. So we're still at the very early innings of it. It's an important building block. It's one that transforms the business and drives organic growth. So we're quite excited about what that means for us. And it's one that ultimately we feel there's more room, you know, obviously considering and focus on EBITDA margins, but there's one that there is more room for us to continue making thoughtful expansions, the commercial team into new regions, to accelerate areas such as LATAM and what we've done in Australia. But from the quality of the pipeline, the depth of the pipeline, the sheer opportunities that these merchants bring to us, we're in a very unique place, and we think that sets us up for success in 2024.
spk07: Great. Thank you. Thanks, Charlie.
spk08: The next question we have is from Timothy Chioda of UBS. Please go ahead.
spk16: Great. Thank you for taking the question. I wanted to dig into a stat that was in the shareholder letter around the 19% growth with customers that are doing a billion or more in volumes. If you could just elaborate a little bit more on that, it sounds like a lot of it was wallet share gains, which is great, and also if you could talk a little bit about the vertical mix of those large billion-plus customers.
spk12: Thanks, Tim. Good to hear your voice. You know, I think what's fascinating for us is the fact that we have historically focused very much on mid-market. Our mid-market customers have grown, and they've grown with us, and certainly just the breadth of new wins that we've onboarded. it's a fascinating place to be. And ultimately it's a humbling place. You know, I started this business 20 plus years ago to help customers accept payments and break down barriers with respect to how they operate their own businesses. And to close your eyes and to think about where we are today, the customers that we support and the end markets that we're enabling, it's just a wonderful journey. And I'm incredibly proud of the team, but from the end market perspective, nicely diversified, you know, we've always talked about, um, how no customer from a customer concentration perspective, and certainly the mix of our own end markets that we support with the addition of B2B government and ISV and the acceleration from being a leader, a category leader in a particular vertical to now being the challenger in many verticals. So what the big takeaway was when we put that stat out there, tumbling to see that customers empower us and then trust us that we're winning volume from customers. You know, if you think about 19%, it's typically faster than the end customer growth itself, which means that it's wallet share that we're gaining and it sets us up well for us to continue executing going forward. And all of that is driven by a couple of big building blocks. You know, the first is we think a category leading that promotes for listening and embedding our customers into our own roadmap in terms of their requirements. and being relentlessly focused on their execution. And the output is really what we're seeing today, is great engagement, very good visibility into where they're going with us, and ultimately a significant building block for our growth trajectory.
spk16: Great. Thank you, Phil. And to your point, you've been doing this for a long time, and I wanted to see if we could squeeze in an interesting question. whether it relates to your platform's business or working with ISVs in general, I think many investors appreciate that the role that the ISV takes in the process, meaning how much they want to take on in terms of responsibilities and risk, et cetera, those can all have impacts on the various unit economics, either to the ISV or to the payments company. In your years doing this, have you seen – any kind of a meaningful shift in those commissions? I mean, generally, the thought is that they've gone up over time. What has been the trend over the last 10 years in your view? And has there been anything different over the last call it two to three?
spk12: You're putting me on the spot with everyone here, but it's fascinating, right? If you think about it, Tim, is you go back to the early or late 2000s where the ISV was a referral model, right? Where they're earning 20, 30% of the commission. And then all of a sudden the ISV realized that the softer part of their own business is nice, but the greater upside is in payments. And many of them were breakeven at best businesses. If you think about some of the even public companies, the relevance of payments, and that includes Shopify, Lightspeed, and many others, is a critical aspect to their own strategies. And that has evolved over the last 15 years where payments is a must do. And then you have the tangible benefits of what the ISD can do is a simpler onboarding, you know, single sign on for both service and payments, you know, cleanliness of data and greater stickiness with respect to the merchant. So it's a no brainer that we've evolved to where we sit today. But not every ISV is alike. And I think that's something that gives us a really good position because we're entering into a fairly mature market where folks have moved from referral to ISO to potentially payback. And we're entering right at the right time. But not every ISV wants to be taking liability. Not every ISV wants to have that journey or at least wants to have that journey up front. So payment companies need to realize that we have to adapt our solution stack to the growing needs of ISVs, and their requirements are going to change over time. Certainly, the biggest focus on profitability from ISVs will be around payments. And as such, I think that bodes well for us as we continue investing in the ISV market. That allows us to enter the market with effectively every incremental gross profit dollar falls to the bottom line. So it puts us in a nice position versus protecting revenue that may have changed in commissions. From a commission standpoint, yes, it's evolved. It's gone from what I remember the 20, 30% higher up. But what you're seeing a lot of payment companies, and we've seen that everywhere, is allocating capital to buy back commissions to keep them at that particular level. That has been an industry trend, and I'm assuming that will continue.
spk08: The next question we have is from Todd Coupland of CRBC. Please go ahead.
spk11: Great. Thanks. Good morning, everyone. I wanted to ask about market conditions. Phil, you talked about having a prudent outlook with an eye to the economy for 2024. It seems like some of your peers certainly in the second half of 23 had improving results. And I was just wondering if you could talk about your view of current market conditions. Thanks.
spk12: The only thing I can double click, Todd, is on volume and activity from our customers and volume year to date with respect to January and February and first few days of March has been very strong. And we're seeing continuous engagement across all of our markets. Last year, we saw some moving around on same store sales. Surprisingly, we thought after the first quarter, second quarter had more headwinds on the same store sales perspective and that has improved. So I would say market conditions so far are fairly stable.
spk11: And I wanted to follow up on your AI point. Do the payment companies have access to the customer data for training models or will it simply be using AI to be more efficient with your own operations? Talk about some of the possibilities and where it might go for Nuve. Thanks a lot.
spk12: Yeah, we're initially so very, very good question, Todd. You have merchant facing products for AI and then you have internal. Certainly for merchant facing, that's part of our regular roadmap. So if you think about like even basic reporting, instead of building templates for reporting, you could just ask what you want from a control panel and provide the data out. So there's a tremendous amount of opportunities around that. There's opportunities around transaction routing, which we have been spending time on to drive greater authorizations and improvements and learning patterns to drive transactions from a fraud and approval perspective. So that is merchant facing. What we're focused very much is internal. How do we make the lives easier for our folks? How do we become more efficient? Some great analysis that we've done with a third party was how do we get all the customer service data to take the call time from, say, 11 minutes to seven minutes or from 11 minutes to five minutes? These are things that we find really, really compelling. And there are great use cases across every single department for us to drive greater efficiencies. greater engagement with our employees and more satisfaction while helping us continue scaling on a profitability perspective.
spk08: The next question we have is from John Davis of Raymond James. Please go ahead.
spk06: Hey, good morning, guys. Phil, really appreciate the color on the strategic fit of Till, but hoping you give us a little bit more on the financial impact, specifically on EBITDA, kind of in one queue and what's baked in for the full year.
spk07: Hey John, it's David.
spk01: So Till, like we said, it was a capability buy, something that we liked in terms of what they did for our ISV B2B channel. So certainly from a revenue perspective, although it's small and growing, it is a nice growth rate. And I'd say that from you know, what we're seeing in terms of kind of a go forward, um, it's, it's like we said, it's, it's a drag, um, um, on EBITDA margin. And that's why you see flat throughout the year. Um, but effectively what we see as we exit the year is really to kind of be able to improve that and, uh, and be breakeven. Um, and look, there's the, all the other items we talked about too, from an EBITDA margin perspective that, that we're driving, we're very much EBITDA margin focused. So you can imagine that what we really liked until the capabilities, like we understood that it would be a drag, but those capabilities outweighed, you know, from a short-term financial perspective, we are very much focused on, you know, the medium and longer term. And we think that it really will help us drive the ISV space, you know, in the U.S. and globally, but also be part of our expansion plan within APAC. So it's like a double whammy. It really brought us a couple of things we're really excited about. I think that's the way to think about it. Margin progression throughout the year, similar to revenue, will improve.
spk06: Okay, so maybe just a finer point. All is equal on an organic basis. You would expect margin expansion this year. It really is just till that's driving margins down on a year-over-year basis at that point.
spk01: Exactly. You got it exactly right.
spk06: Okay, great. And then just on global commerce, appreciate World Cup. and uh laughing or kind of the customer loss can you help us dimensionalize because obviously world cup is in the fourth quarter that'll go away but we'll still have the customer lost for a few more quarters so i think we deceled or you deceled about 1300 basis points from 25 to 12. so just trying to break that decel out between the world cup and customer loss
spk12: I'll take that. I think we wouldn't want to double-click specifically into it. Obviously, World Cup was a significant event. The customer was a top-end customer that we off-boarded. We're going to lap that in the first half of the year. So from a building block perspective, what I'd love to point to is continuous scaling in our global commerce with 30-plus percent volume. We're going to continue seeing volume growth across the organization accelerate. So for 2024, we'll see between 20% and 24% based on the outlook versus exiting at 19%. So really good momentum in the business. The two headwinds that we have in global commerce are specifically World Cup for T4 and just lapping the customer that will happen in the first half of the year.
spk07: Okay. Appreciate it, Carlos. Thanks, guys. Thank you.
spk08: The next question we have is from Jason Kupferberg of Bank of America. Please go ahead, Jason.
spk13: Good morning, guys, and I appreciate the conservatism and the outlook. Sounds like that's the case, both revenue and EBITDA-wise. Phil, I wanted to follow up on your comments around the verticalization. Like you said, you've now obviously opened the aperture a bit in terms of the number of verticals that you actively participate in and pursue. Can you just give us a sense right now what you're seeing in terms of demand and pipeline on a relative basis across those verticals? Which ones are particularly robust and which ones perhaps are less so? Thanks.
spk12: Certainly. Thanks, Jason. You know, we focus on mid-market to enterprise clients that operate and specifically we're talking about the global commerce because I'll get to B2B in a second. But we focus on customers that are mid-market to enterprise that have international presence, right? And with that, then we break it down to specific verticals where we build a vertical team from a commercial perspective and account management perspective naturally embedded with a product team to build solutions that are bespoke and changing from those end markets. We spent equally, Jason, in every single one of them, and we're pretty excited about going from a leadership position in one market to the challenger position in others. You know, I'd really urge you to take a double click on the sheer amount of press releases from the wins that we've been having across the board. I couldn't tell you just one of because when we end up looking at the pipeline, we really see it across all major verticals with significant tailwind opportunities, really across, you know, travel, digital goods, marketplaces and platforms. You know, obviously on the social gains perspectives, we continue helping our current customers and naturally in our leadership position with gains we extended. So we're excited to see the opportunities. None of our customers are, I'm standing still. I think that's the other thing that's very interesting is they all have their own growth trajectories that we get to execute on. So you have your pipeline with respect to new business, Jason, but you certainly have your pipeline from your own customers on their own journeys. which is often equally, if not more exciting than the new business in here. So all combined, um, very good momentum. Um, you know, I could call out our momentum and travel. I could certainly call out our momentum with marquee customers, um, be it Microsoft and others that we've onboarded, even, you know, to mention the family pre opportunity here in Quebec, which is one of our major retailers. And that success is certainly parlaying into all other end markets with respect to B2B. specifically, we have signed a significant expansion with respect to the end ERP platforms that we support. So if you think about B2B is we enable the platform, but the verticals that we support are driven by where the platform has success. So we don't actually drive the end customer target. We drive the B2B enablement. And that has been on a wonderful journey as we've gone from, you know, a handful of partners to multi-partners from US only to expanding into Canada last year with a fantastic roadmap to go international and really good engagement with our partners. So we're just starting on B2B, but B2B is less vertical specific, more platform specific because it is a direct sales engagement integration to DRP. and then a direct sales to the bar, and then an indirect sales to the end merchant, if that makes sense. It does. I appreciate the caller.
spk13: Just a quick one for David. Can you quantify the TIL revenue contribution both for Q1 and full year 24? Thanks, guys.
spk01: Hey, Jason. Like we said, it's in early stage, so it's not a significant amount of revenue. Overall, you know, it's going to contribute really from the capabilities perspective in the near term, and longer term it's really what's going to drive revenue on the ISV side. So I'll leave it at that for now at this point, Jason.
spk07: Thank you.
spk08: This ends the allotted time for Q&A, and I'll turn it back to Chris Mamone.
spk05: Thanks again for joining us today. Please reach out to the IR team with your follow-up questions. In the next few weeks, we're planning to attend investor conferences hosted by Wolf and Bank of America, and we hope to see many of you during those appearances.
spk07: Bye for now. This concludes today's conference. Thank you for joining us. You may now disconnect your lines.
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