Nuvei Corporation

be expanding from country to country, growing not only in one market, but many markets around the world. They may need additional functionality for pay-ins, they may need payer functionality, they may need more alternative payment methods, or they may need to simplify their technology stack. Whichever is the need, our customers end up requiring additional capabilities and consuming more of our flexible offering. And that's what's really powerful. It's what drives our strong net dollar retention rate. Our experience shows that as we add and deliver more solutions to our customers, it enables us to create relationships and grow with them. And that's what our business is all about, helping our customers connect with theirs. It's a foundation of our land and expand strategy. A perfect example of this is our recent work with longstanding customer Entain and their BenMGN partnership in which Nuvei assisted them with their pay-in and payout functionality in North America. And we see many such opportunities like this ahead. To the time of our IPO last year, we talked about having an under-distributed business model, which has been an area of investment focus. We've accelerated investments originally scheduled for 2022 into 2021, expanding our commercial teams globally. Today, our commercial team has more than doubled from the first half of last year, and we're extremely pleased with the talent that we brought on board. The team is making real contribution, and there's a lot of momentum, which is both very exciting and an important flexion point. We manage our commercial teams by having regionally vertically focused salespeople that are in country, in time zone, and in language, supported by a team of local solution engineers, integration specialists, and account managers. This white glove service is crucial to building relationships with our customers given the complexity and importance of the problems we are solving for them and the sophistication and capabilities of our industry-leading technology, which is unmatched in our opinion. The conversations with customers we're having today are so powerful because we're not just talking about simply helping them with acquiring. We're talking about helping them with our vast solution set that is purpose-built specifically for their verticals and their geographies. In our opinion, we're only one of the few industry participants capable of this. Alongside our investment in direct sales is our increased investment in marketing, account management, and corporate development. Enhancing our brand awareness is translating to increasing and more frequent engagements with large growing enterprise customers we wouldn't have spoken to within the past. Our pipeline has never been deeper and the team is engaging with really the who's who in the verticals in which we operate and we're starting to see the results with our recently announced wins. We have a lot of momentum that's building and it's very exciting to see what's happening across all our geographies and further strengthen LATAM with the addition of payment TANs. I'm really proud of what the team is doing. Our success is built on our reputation, our delivery, and our focus. We expect more good things to come. Turning out to technology innovation, this year's third quarter was without exception the most significant quarter for solution deployment, offering meaningful opportunities, including TAN expansion, growing discussions with customers, and servicing new geographies. Let me highlight five key innovations for this quarter. First, we launched Card Issuing in Europe, a brand new line of business that further expands our product offering and solution capabilities to our customers in the region and presents an exciting incremental market opportunity for future growth. Second, we launched Visa Direct and MasterCard sent payouts in North America, further expanding and enhancing our suite of real-time payment options, fully reconciled and net settled to the customer. Our payout offering is integrated into the flow of funds, meaning we offer net settlement to the customer after reconciling the funds collected, paying the disbursements, and subsequently net settling the customer. This is critically important in simplifying customer operations when considering the multiple types of pay-ins and the complexity associated with driving instant or near-instant payouts so our customers create stronger relationships with their customers. Today, we offer one of the industry's most robust suites of digital payout options in both North America and Europe. Third, we've added more than 50 new alternative payment methods since the beginning of the year, increasing our portfolio of alternative payment methods to more than 500 at the end of the third quarter of 2021, allowing our customers to operate in more countries and accept more forms of regionally familiar and preferred digital payment methods in order to drive higher conversion rates. Fourth, our platform is fully live, supporting US online gaming, an incredible team effort. Today, we offer the most comprehensive payment acceptance, payouts, alternative pay methods, and integrations for U.S. online gaming and sports betting operators. Many of you heard me talk about crawl, walk, run. We're definitely walking now. It's still early innings, though we recently announced some exciting wins, including BetMGM, 888, Sports Illustrated Sportsbook, Carousel Group, among several others. Finally, we made the investments to continue scaling our technology to offer no latency, minimal downtime, and burstable capacity to support our customers' future growth. In the third quarter, we achieved record transactions per second of 325 compared to our previous record of 222. Turning now to M&A, we completed three acquisitions in the third quarter, including the Zuma, Simplex, and PaymentTest. While not currently material to our results, each of these early-stage companies has significant capabilities and momentum adding exciting breadth of products and expanding both region and market opportunities for New Day. As a brief reminder, Azuma enhances and expands New Day's portfolio of North American payment options with instant bank-to-bank payments for pay-ins and payouts and real-time payments for accelerated withdrawals. allowing our customers to provide their customers with instant and immediate payouts into the bank accounts 24-7, 365. Mizuma is seeing exceptional momentum with monthly bond growth for September up 25% over August. Combined with Nuvei, Mizuma is an integral part of our North American payment offering, and we're excited to see momentum there continue. Simplex extends Nuvei's capabilities to offer bespoke fraud prevention, and risk management tools backed by proven artificial intelligence technology, resulting in higher conversion rates and better liquidity, simplifying instant fiat purchases for cryptocurrencies, NFTs, and decentralized finance providers. We are prioritizing Simplex as a risk as a service and intend on offering our expanded solutions to all our existing customers. Similarly, we are introducing all the new base product solutions and capabilities to Simplex customers. And payment as, further increases our total addressable market by significantly expanding and strengthening our presence in Latin America. Hence, our regional processing capabilities enables us to support additional local payment methods and ensures we are well positioned to service new and existing global customers in this fast-growing region for online commerce. What's important to recognize about our M&A strategies is our focus on strengthening and broadening our product suite by adding unique and valuable capabilities to our already extensive solution offering for our customers that are relevant to their industries while also looking for regional market expansion opportunities, further extending our leadership position. Let me highlight that we have an exceptionally strong balance sheet allowing for flexibility as we explore future opportunities. With respect to global concerns over supply chain constraints, we haven't seen nor do we expect to have any impact on our business. Our customers and verticals are predominantly digital and as such are insulated from the recent supply chain constraints. For our physical good customers, we see wallet share expansion offsetting any potential slowdown. Given the solid results and the momentum we are seeing quarter to date, the depth of our sales pipeline, acceleration of investments and distribution, introduction of new product capabilities, and expansion to new geographies, we are raising our financial outlook for 2021. We are also reiterating our medium and long-term targets previously provided. Before I turn the call over to Dave, I'll repeat how incredibly pleased we are with our results, driven by the execution of our strategy. We're extremely well positioned as a company for the opportunity ahead. We believe it's early days and we're still very much on the ground floor. As always, I want to recognize and thank all my colleagues who contribute to our success each and every day. I also want to wish you and your families the very best as we approach the upcoming holiday season. With that, I'll now turn over to Dave to discuss the financials and our updated financial outlook for 2021.

Thanks, Bill, and good morning, everyone. We are pleased to report another strong quarter. Our performance continues to be driven by our team's focus on executing on our strategy. For the third quarter, total volume increased by 88% over the same period of last year to $21.6 billion. We are very pleased with the growth across all four regions. North America and EMEA, which represent 95% of our volume, we experienced strong growth of 118% and 62% respectively. Both of these regions also represent meaningful growth opportunities for us due to their market size and TAM expansion in our verticals. In the emerging markets of Latin America and Asia Pacific, volume grew 93% and 140% respectively. However, these regions represent significant opportunity for us on a combined basis as they account for only $1 billion of total volume for the quarter, which is less than 5% of our total volume. With the addition of Paymentes, we now have a meaningful beachhead within Latin America, which we expect to further fuel our growth in the region. The strong total volume performance in the quarter resulted in revenue growth of 96% to $184 million. As we have noted previously, total volume and revenue may grow at different rates, depending on the relative mixes within each. We are focused on solving the needs of our customers. Ultimately, this drives additional volume on our platform, resulting in incremental gross profit dollars. Due to the scalability and leverage in our operating model, This provides for the potential for increased profitability. Gross margin in the third quarter was 79.2% compared to 81.9% in the third quarter of 2020. The change in gross margin is as a result of the inclusion of certain acquisitions which have a higher associated cost of revenue. The increase in selling, general, and administrative expenses is as a result of both inorganic and organic growth. We continue to invest in the business, including in distribution and technology. We believe these investments will continue to drive our growth. Adjusted EBITDA increased by 97% in the third quarter to $80.9 million. Adjusted EBITDA margin was 44% in the quarter compared to 43.7% in the prior year period. Net finance costs decreased by $95 million, primarily as a result of $83 million in non-cash finance costs in Q3 of 2020, resulting from the IPO in September last year, as well as the reduction in debt since that time. Net income for the quarter was $28 million, or 19 cents per diluted share, compared to a net loss of $78 million, or 88 cents per share, in the third quarter of 2020. Adjusted net income was $62 million, or $0.42 per diluted share, compared to $16.5 million, or $0.17 per diluted share, in 2020. Our cash position and cash generation remain strong. Operating cash flow for the nine-month period was $202 million, compared to $49 million for the comparable prior period. As of September 30, 2021, We had cash of $289 million, while amounts outstanding under our credit facilities was $512 million. Our balance sheet remains solid and does not reflect the impact from our US IPO on October 6th, which resulted in net proceeds to the company of $411 million. Furthermore, our $385 million revolving credit facility remains undrawn, providing us with flexibility as it relates to our M&A strategy. I will now discuss our financial outlook for the fourth quarter and full year 2021 and will refer you to our forward-looking information disclosure in our Q3 earnings press release and our MD&A. For the fourth quarter, we expect total volume of between $25.5 and $26.5 billion, revenue of between $204 and $210 million and adjusted EBITDA of between 86 and $90 million. And based on our performance for the three and nine month periods ended September 30th, 2021, as well as continued momentum in the business, we are raising our full year outlook and now expect total volume of between 90 and $91 billion, revenue of between 717 and $723 million, and adjusted EBITDA of between $312 and $316 million. The updated financial outlook for both the fourth quarter and full year include the recent acquisitions of Mizuma, Simplex, and Paymentez from their respective acquisition dates. As Phil mentioned earlier, while not currently material to our results, each of these early stage companies adds to our solution set and expands regional and market opportunities for us. The outlook, specifically the adjusted EBITDA, reflects our strategy to accelerate our investments in distribution, marketing, innovation, technology, as well as the infrastructure resulting from the acquisition of Mizuma. We are also reiterating the medium and long-term growth targets we disclosed last quarter of total volume and revenue growth in excess of 30% annually in the medium term and adjusted EBITDA margin greater than 50% over the longer term. We're very excited about the remainder of this year and what lies ahead for Nuve. We're now happy to answer your questions. Operator, please open the lines for Q&A.

Thank you. At this time, we will be conducting a question and answer session. If you would like to ask a question, please press star 1 on your telephone keypad. The confirmation tone will indicate your line is in the question queue. You may press star 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 start keys. One moment please while we poll for questions. And our first question comes from the line of George Mihalos with Cohen. Please proceed with your question. Hello, George, are you there on the line? Your line is live if you're there. Not sure if you're on mute. Okay, if George is not on the line, I believe we can just go ahead with the next question. Our next question comes from the line of Sanjay Sakrani with KPW. Please proceed with your question.