Nuvei Corporation

Good morning, ladies and gentlemen, and thank you for standing by. Welcome to Nuve Corporation's fourth quarter 2021 earnings call. As a reminder, this conference call is being recorded. I'll now turn the conference over to Anthony Gerstein, Vice President and Head of Investor Relations for Nuve. Please go ahead, sir.

Thank you, Operator, and good morning, everyone, and thank you for joining us. With me today are Philip Thayer, Chair and CEO, and David Schwartz, CFO. As a reminder, this conference call is being recorded and webcast and is copyrighted property of New Bay. And rebroadcast of this information, in whole or in part, without written consent of New Bay, is prohibited. This morning, New Bay issued a press release announcing financial results for the three-month period and full year ended December 31, 2021. The release, as well as an accompanying presentation, is available in the investor relations section of the company's website, newbay.com, under events and presentations. During this call, we may make certain forward-looking statements within the meaning of the applicable securities laws. Such forward-looking statements involve known and unknown risks, uncertainties, and other factors that may cause the actual results, performance, or achievements of the business or developments in NewBay's industry to could 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-based filings with the Canadian Securities Regulatory Authority and on the company's website. Our discussion today will include non-IFRS measures, including adjusted EBITDA, adjusted net income, adjusted net income per share, and free cash flow. Management believes non-IFRS results are useful in order to enhance our understanding of our ongoing performance, but they are not supplement to and should not be considered in isolation from or as a substitute for IFRS financial measures. Reconciliation of these measures to IFRS measures is available in our earnings release and MD&A. We'll open up the call to your questions after our prepared remarks. With that, I'll now turn the call over to Phil.

Thanks, Anthony, and thank you, everyone, for joining us today. We had an excellent fourth quarter delivering results ahead of our outlook and capping off an exceptional year in which we advanced our strategic initiatives while achieving an unprecedented number of milestones along the way. For the fourth quarter, total volume increased 127%, revenue increased 83%, and adjusted EBITDA increased 78% year-over-year. For the full year 2021, total volume increased 121%, revenue increased 93%, and adjusted EBITDA increased 95% year-over-year. On an organic revenue basis, which excludes revenue from acquisitions completed in the trailing 12-month period, increased 55% and 61% for the fourth quarter and full year, respectively. Our net revenue retention rate was 146% for the 12-month ended December 31, 2021. Our consistent revenue growth profile combined with our exceptional free cash flow generation and strong balance sheet is class-leading in our opinion when comparing Nuve to many other fintech companies. We've made tremendous progress transforming the company into a leading global payments platform. Most importantly, our TAN is large and growing, and we saw so much opportunity ahead of us. To continue to accelerate our momentum, we've announced several promotions and leadership changes across our organizations. First, we've appointed Yuval Ziv to president of Nuve, a newly created global role. Yuval has been with the Nuve group of companies for the past 15 years, and his leadership and experience are invaluable. He leads worldwide product, sales, marketing, client engagement, and AI. We've also promoted Parfum Orar, who joined the company in 2014 as chief strategy officer, to Nuve's global expansion officer. PRAF has moved to Singapore and is responsible for driving NuBase international growth in target markets across Asia Pacific, the Middle East, and North Africa. Third, we've appointed Netanyahu Kabbalah, a co-founder of Simplex, who joined through our acquisition of Simplex last September to Chief Data and Analytics Officer as we continue to grow our data-led services. I also want to welcome all 75 of our new teammates who joined us in the fourth quarter from around the world. We're excited to have you as part of the Nuve family, which totaled 1368 on December 31st, 2021. We remain steadfast in our mission to make the world a local marketplace by growing our modern, scalable, modular technology with our key growth pillars, namely expanding our geographic reach, growing with our existing customers, accelerating new client wins, and finally exploring inorganic opportunities that drive further value to our customers. As you know, our focused verticals each have inherent growth, longevity, and a propensity to operate globally. Our technology and expanded geographic reach is helping win customers in all our core verticals, which include regulated online gaming, social gaming, online retail, digital goods and services, financial services, travel, and now digital assets and cryptocurrencies. We're excited about the progress we're making across all verticals, and in our earnings supplement and press release today, we are providing a one-time disclosure which includes showing revenue contribution and growth by vertical for the full year 2021. While we have historically discussed concentration by vertical in terms of gross profit dollars, which continues to be no more than approximately 21% for any given vertical, our additional disclosures provided today focus on revenue to remain consistent across all one-time disclosures. As you'll be able to see, Nuve's experiencing momentum across all verticals but we are especially pleased with the progress we're making in our focused global verticals. At our core, we are a technology company. We are a payment innovator driving real-world solutions that make a material difference to our customers' businesses. What's crucial to understand is that our modern, scalable, modular technology stack addresses the needs of our customers with an unprecedented number of solutions offered uniquely as modules, a la carte, that go far beyond acquiring. Our technology stack has been purpose-built from the ground up by our nearly 500 software engineers and products experts supporting our exceptional growth. Having our own acquiring licenses in multiple jurisdictions, principal membership with the card schemes, and our own processing platform allows us to dictate our own roadmap and is a primary reason we have been able to successfully accelerate our product innovations. In fact, we are one of the few truly global payment platforms today. Available a la carte as modules, our platform offers our customers incredible flexibility as they look to simplify and efficient technologies, consolidate global vendors, and streamline their back office functions while achieving cost and operating synergies. While we intend to unpack these modules and respective features in detail at our upcoming Capital Markets Day, I thought it important to highlight a few key modules. The journey begins with the flexibility of our API solutions, allowing our customers to connect to our platform for their global operations, supporting in-app, online, and soon in-store customer engagements. Or preferably, our customers can elect to use our low-code cashier, simplifying global commerce, and instantly offering our entire toolkit while descoping PCI burden. Once integrated, our clients can use our solutions as is appropriate for their business model, and this could include Our advanced authentication tools to comply with enhanced customer authentication mandates around the world, available as plugins, meaning that our authentication tools are available in conjunction with any third-party acquirer. Our global payment gateway, which offers payment orchestration and connectivity to over 200 markets around the world. Our single global processing platform connected directly with the card schemes. Our local acquiring, now offered in 46 markets globally. We simplified onboarding and contracting. Our open banking payments for faster SEPA and instant SEPA in Europe, faster payments in the UK, and ACH, same to ACH, and RTP in the US. Our more than 530 alternative payment methods, including cryptocurrency acceptance. Our instant payout solutions across multiple payment mediums. Our risk as a service, enabling transactions scoring, mitigation, and now full guarantee from both ACH and card acquiring, our debit and very soon prepaid card issuing, our advanced currency management solutions to help localize offerings, our rich data reporting to enhance business intelligence, our extensive reconciliation tools to streamline back office functions across all regions, our on and off-ramp solutions for cryptocurrencies, NFTs, and DeFi, supporting over 109 different coins via 89 different fiat currencies, in addition to a long list of value-added capabilities that build deep boats with our customers. And while the list is long, I thought it worthwhile to highlight our native commerce platform, which includes all key components that our customers require to operate globally. Each individual module has its own independent addressable markets. And that's why you can't simply compare acquiring only peers to Nuve as our modules expand our TAM and differentiate Nuve from additional and legacy acquirers. And remember, to enable all this functionality, customers would need multiple vendors per country, resulting in increased costs, complexity, inefficiencies, which would impact their flexibility and ultimately hinder their growth opportunities. Providing all these services is why we win. For example, combining risk as a service, acquiring and payouts, simplifies experience for both our customer and their customers as we manage the complete risk-free process of pay-ins, regardless of payment medium, reconciliation, drive real-time payouts to our customer's customer, and net settle to our customer, eliminating back-office workload, allowing our customers to focus on what's important, growing their business. So while each module can be consumed individually, combining them together creates an incredibly powerful offering to our customers their customers, and Nuvei. We believe our approach to offering solutions as individual modules provides greater flexibility and allows us to engage with customers based on their specific needs at the time of onboarding and grow with them as their needs and requirements change. It's a foundation to our land and expense strategy and what drives our net revenue retention rate, which I'll highlight in a moment. We've broken out processing revenue into acquiring and modular technology revenue to help you appreciate the breadth of our technology and the relevant contribution to our growth trajectory. For the full year 2021, acquiring represented approximately 62% of total revenue, an increase of 73% from the prior year, while modular technology revenue represented 38% of total revenue, increasing 138% from the prior year, nearly twice the rate of acquiring. Because of our modular technology and its significance to our success, you can see why comparing Nuve to other acquirers is simply not accurate in our view. Most importantly, we're not standing still as our pace of innovation is accelerating. At the same time, our technology is scalable. In 2021, our transaction count grew 77% from 2020. Breaking it down one level deeper, credit card transactions increased 51%, Debit card transactions increased 21%, and alternative payment methods increased 286%. Furthermore, we have ample capacity to continue processing significantly more going forward. And because our technology is fully proprietary, we customize our solutions to any customer, vertical, or geography. This flexibility is paramount as we continue scaling and growing our customer base around the world. The takeaway here is that NuVase technology is really second to none in our opinion. Unlike other global payment providers, including Ajin and Stripe, we believe customers prefer our flexibility in our modular offering. We are one of the few leading global payment solution providers with this depth of capabilities, which is driving our overall performance and showing up in our new customer wins, which I'll address momentarily. I'll now walk you through our growth pillars in greater detail to help you appreciate our focus, momentum and growth trajectory. I'll also describe how we've expanded our TAM and explain why we are so confident in our outlook for this year and beyond. First, let's talk about geographic expansion. Many of our customers may be expanding country to country, growing not only in one market, but in many markets around the world. As we enable more geographies, it allows our customers to seamlessly and immediately access those markets via their existing integration into Nuve. And this is where we absolutely shine. We normalize customer experiences from market to market so they could focus on growing their business. And coupled with our single integration, as we enable more countries, our clients can activate them without any technical integration whatsoever. Today, we offer connectivity in over 200 markets, making sure our platform can support our clients everywhere they want to be. Additionally, we now offer local acquiring in 46 markets with simplified onboarding, contracting, client services, and standardized reporting. As part of our geographic expansion strategy, we also continuously seek paid institution licenses, card association memberships, and acquiring licenses in order to better support our customers. We have obtained our visa license in both Hong Kong and Singapore. We continue to focus both in Asia and Lantan to expand our self-acquiring. As this occurs, it allows us to increase our capabilities to providing gateway or routing only, to provide full-stack end-to-end offering. This strategy, in unison with our technology, is another key pillar to driving our impressive and our arms. Embedded in our geographic expansion is a change in regulatory framework around the world and certain key focus verticals. As you know, we believe we are in the very early days of online gaming and sports betting, not just in the United States, but also in Canada and hopefully soon in Brazil. We're executing well in these markets and our momentum in the U.S. has been accelerating. In 2021, we launched our global payment business unit in North America and significantly enhanced our capabilities in LATAM with the acquisition of payment tests. Today, we have commercial teams across both regions, and coupled with key product launches, we now support most of our modular offerings in both geographies, dramatically expanding our tab for 2020. And naturally, we are not stopping there. Our mission is to make the world a local marketplace, and while we're focused on scaling in our current regions, we're also excited about meaningfully expanding our presence in key Asian markets. For perspective, looking at our revenue by region, for the full year 2021, EMEA is North America, LATAM, and APAC represented approximately 54%, 42%, 3%, and 1% of revenue respectively. And from a growth perspective, EMEA, North America, LATAM, and APAC all increased 123%, 64%, 112%, and 16% respectively. Our second growth pillar is growing with our customers. And when you bring it all together, approximately 80% of our growth in 2021 came from capturing greater wallet share from our existing customers. And these are driven by changing consumer behavior, advancing regulatory frameworks, our customers' own growth trajectory, our technology, and our new geographies. This is best reflected in our overall net performance. revenue retention rate of 146% for the 12 months ended December 31st, 2021. What's most interesting and compelling is that when you unpack it further, you'll see that our global e-commerce direct channel had an NRR of 179%, which is a true testament to the success of our investment in this channel. Our global e-commerce direct channel is the largest in terms of revenue contribution and is growing the fastest. By contrast, our North American small business portfolio and our e-commerce reseller channels are slower growth and a smaller part of our revenue. Naturally, as our global e-commerce direct channel continues to expand, so too will our growth. With our new geographic capabilities in North America and Latin, we feel there remains a significant opportunity to cross out within our current customer base, and we're starting to see this with some of our existing gaming customers who are entering the U.S. and Canadian markets, for example. The next growth pillar is winning new customers. As you may recall, we have frequently spoken about being under-distributed and we've since been accelerating our investments and expanding our direct commercial teams globally. We've done this because the complexity, the breadth of our technology and the types of customers we are targeting, in addition to its global nature, simply requires a direct sales force. Our investments are yielding exceptional results with so much more to come Our objective remains to be local to our customers around the world and remain focused on continually expanding our sales force in every region to make sure we have global coverage. We manage our commercial teams by having regionally vertically focused sales teams that are in country, in time zone, and in language, supported by a team of local solutions 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 challenges we are solving for them and the sophistication and capabilities of our leading technology. Looking back, we started with a commercial team of about 10 salespeople and have now expanded to more than 100 at the end of 2021, with the target of multiplying again in the coming years, mostly as a result of our expanded TAM opportunities, as I mentioned earlier. In 2020, new in-year customers generated $42 million in revenue, This cohort subsequently grew in 2021 to more than $190 million. In 2021, new in-year customers represented an excess of $71 million, which represents a 69% increase in new business compared to 2020. You can appreciate that the 2021 cohort is expected to significantly grow in 2022. And our momentum continues as we see exceptional depth in our pipelines. We are engaged with the who's who across all our key verticals and geographies. We're expecting a very strong performance in this area in 2022. Alongside our investment in direct sales is our increased investment in marketing. For perspective, we're increasing our marketing spend in 2022 by up to approximately $20 million compared to 2021. We expect this investment to yield greater brand awareness with the objective of ensuring Nuve is associated with other global providers. The increased marketing spend is fully considered in our adjusted EBITDA outlook for the year. Remember, our landing span strategy is also relevant to new sales and allows us to engage with customers around the flexibility of our modular technology offerings, which means Nuve can build relationships with customers and grow with them accordingly. Turning now to our last strategic growth pillar, which is M&A. We don't do acquisitions simply to buy short-term revenue growth. Rather, our acquisition strategy follows three strict criteria as we look at adding new geographies, new capabilities, and or scale to support our long-term growth. We completed four acquisitions in 2021, Ace Commerce, Mizuma, Simplex, and PaymentTest, and we are pleased with how all these acquisitions are performing. What's most exciting is that each one of these early-stage businesses strengthens our technology and sales proposition. bringing additional growth opportunities and capabilities to our platform for the long term. For 2021, we reported revenues from these four acquisitions of approximately $73 million, representing approximately 10% of our revenue. Going forward, our exceptionally strong balance sheet and low leverage provides optionality and flexibility as we continue exploring future opportunities. With additional one-time disclosures today, and the double-click into our growth pillars, you should have a much better understanding as to why we are unique when compared to others in the space and appreciate why we're so excited about our future. We're also looking forward to sharing even more detail with you at our upcoming Capital Markets Day later this month. This morning, we're announcing that the Board has authorized a share repurchase program pursuant to which Nuve can purchase in open periods, in one or more transactions, and at its discretion, up to approximately 6.6 million subordinate voting shares over the 12-month period, which represents approximately 10% of the public float. The NCIB does not obligate Nuve to acquire a specific dollar amount or number of shares and may be extended, modified, or discontinued at any time. Also this morning, we're introducing our financial outlook for the first quarter and full year 2022, which Dave will walk you through in greater detail. We are also reiterating the medium and long-term targets previously provided of total volume and revenue growth in excess of 30% annually in the medium term and adjusted EBITDA margins greater than 50% over the longer term. Before turning it over to Dave, I want to briefly touch on the tragic events in the Ukraine. Our thoughts are with the innocent people of Ukraine. As it relates to our business, we are of course complying with all global sanctions and confirm that our exposure there is negligible. We've also announced that we will match any and all employee donations to any accredited charity supporting Ukraine up to a total of $500,000. Furthermore, I've extended our global HR teams to help our employees across neighboring countries to ensure theirs and their family's safety. Finally, I want to recognize all the fabulous and hard work of all of our employees who contribute to Nuve's success each and every day. Your commitment is invaluable, and it's a privilege to have you all as shareholders through our global LTIP program, which we introduced company-wide in November. We also recently implemented a policy that each time we beat our outlook, our employees receive an additional two and a half days of vacation. You guys are rock stars. I'm grateful for your dedication and contribution to our mutual success. In closing, I'll reiterate how pleased I am with our results and the progress we are making across the entire company. I love where we sit as a company today, I've never been more confident and optimistic about our future. With that, I'm going to turn it over to Dave to discuss the financials and our financial outlook for 2022.