Nayax Ltd.

Welcome to the NIACS Limited first quarter 2021 earnings conference call. All participants will be in a listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star then one on your telephone keypad. To withdraw your question, please press star then two. Please note, This event is being recorded. I would now like to turn the conference over to Miri Segal of MSIR. Please go ahead.

Thank you, operator, and everyone for joining us today. Welcome to NIAC's first quarter financial results conference call. Joining me today are Yair Nechmad, NIAC's co-founder, chairman, and chief executive officer, and Liron Grossman, chief financial officer. Also on the line today is David Benavi, co-founder and chief technology officer, who will be available during the Q&A session. All forward-looking statements on our call today are based on assumptions and therefore subject to risks and uncertainties that may cause actual results to differ materially from those projected. We have no obligation to update these statements except as required by law. You can read about these risks and uncertainties in our earnings press release issued earlier today and our regulatory filings. Today's call is accompanied by a presentation. You're welcome to access it from NIAC's IR webpage. And finally, note that all figures in today's call will be reported in U.S. dollars unless stated otherwise. On that note, I'd like to turn the call over to Yair Nechmad, NIACC CEO. Yair, please go ahead.

Thank you, Miri. Welcome, everyone, and thanks for joining us on our first conference call as a publicly traded company. For those on the line who are not familiar with our story, I would like to tell a bit about NIACC. The company was established in 2005 in Israel. and has since grown to 10 sales offices with over 400 employees all over the world. We established a payment institution that accepts more than 80 payment integration in 40 different currencies. Our sales and distribution network is servicing more than 50 countries. These distributions are well integrated with NARCS and undergo an annual certification process. Our business model includes three strong foundations. The hardware generates revenue per sold and connected point of sale. Our telemetry and software are based off subscription model, which comes with a management suite, connectivity and support, and consumer engagement suite to increase our customer revenue. Now our journey has led us to becoming the first unicorn company to be listed in Tel Aviv Stock Exchange. As of May 13, NYX began trading under the ticker symbol NYAX, N-Y-A-X, at 10.5 shekels, approximately 3.25 cents U.S. dollar. The offering consisted of 44 million ordinary shares generated around $130 million U.S. dollar. The use of this proceeds will be allocated to our current business strategy of entering new markets, financing strategic acquisition and driving customer growth through loyalty program and product enhancements. It is a new chapter and important milestone for our management team and employees. We believe that sharing our business model, strategy, expansion plan and technology with our investors will demonstrate our strong market position and the conviction we have in our plans to keep expanding market share globally. We believe Knives is the leading global commerce enablement platform, providing cashless payment and merchant account solution for retailers. Unattended retailers spend dozens of vertical and include vending machine, digital kiosks, car charging station, and more. Our goal is to help our retailers grow their revenue. In slide six, you can see Knives aims to solve all retailers' needs, providing one point of contact for seamless solution, ease of use, and onboarding. Our platform covers all aspects of our customers, businesses, including loyalty campaign and digital punch card to engage consumers and increase sales with a mobile Monix wallet app. Our management suite deliver real-time monitoring and store availability, while our cashless payment acceptance increase sales. As a result, our customers benefit from significant cost reduction and increased revenue. We provide a mission-critical solution that translates into high ROI for our customers. Slide seven, even with the ongoing pandemic in Europe during Q1, we saw an increase of 12% in our number of transactions, showing a shift in consumer behavior toward digital payments. We connected 21,000 new devices in Q1. This represents 50% of our entire growth connected and managed devices in 2020. providing a positive indication of what's to come. We increased our revenue by 26 percent, which illustrates the company's position and strategy. Slide eight, moving on to slide eight to provide a quick overview of our quarterly performance. This quarter, Knight reported total revenue of $22.8 million. This represents a 26 percent growth compared to the same quarter last year. which was almost entirely COVID-free. This growth demonstrates that despite the pandemic still impacting Q1 this year, we are still able to achieve high growth. Our recurring revenue ratio grew from 57 to 59 percent, which is an increase from Q1 2020. Moreover, our recurring revenue for monthly services and processing fees increased by more than 30 percent year-over-year. Growth margin was 46%. We have more than 402,000 connected and managed devices, and more than 20,000 customers that are using our platform. Our net retention grew to 108%, which illustrate the market recovery and confidence our customers have in our platform, support, and our long-term relationship. Slide nine, in terms of the operation, We strengthen our partnership with Mastercard and Visa, which solidify our market positioning. In addition, our Vipos Touch, the all-in-one solution for cashless payment and integrated telemetry was recognized as leading payment system and the best payment system in the UK at the 2021 annual Vendee's event. We are happy to update that we came closer to finalize our Wismo acquisition and omni-channel marketing solution. This will increase our presence in current market and add to our customer service capabilities by enhancing feedback through in-store purchases. In the U.S., we launched the first unattended e-commerce channel intended to help us capture the SMB market and automated the onboarding and KYC process. We are well-positioned to capture small and mid-sized businesses globally, which is a dominant portion of unattended markets. With our support and customer success team, we are a preferred partner for Tier 1 customers as well. I will now pass the call over to the Chief Financial Officer, Leon Grossman, to discuss our financial results in detail.

Thank you, Yair, and everyone for joining us. I would like to start with some highlights from the first quarter of financials. Looking at slide 10 of our presentation, total number of connection as of the end of the quarter was approximately 402,000 connections, up from 374,000 in December 2020. NIAS connected pointer cells also increased to 302,000, up from 280,000 three months ago. This growth of 21,000 connected point of sales is equivalent to half of the full year's growth in 2020. We expect these figures to gradually increase each quarter as we sell more point of sale and gain more market share. Moving on to slide 11, total transaction value in Q1 2021 grew to $246 million, up from about $190 million during the same period last year. which shows a 30% growth. Total number of transactions for the first quarter of 2021 was about 144 million, compared to about 127 million the first quarter of 2020. This represents an increase of 12%. The increase in transaction value and volume relates mainly to the growth we saw in the US and Australian market. Both markets are contributing higher average transaction value versus lower growth rate in Europe due to the pandemic. On to slide 12, we can see our revenue by geographical breakdown. Europe accounted for 44% of total revenue, North America 33%, Australia 13%, and the rest of the world 10%. We have seen notable revenue growth in Australia, as it made up only 10% of our total revenue in 2020. The growth relates to the Australian market returning to post-pandemic normalcy. Our first quarter performance reflects our ability to maintain a healthy growth rate in a difficult global economic environment and operate effectively despite COVID-19 restrictions. Moving on to slide 13, we see total revenue in the first quarter of 2021 was $22.8 million, an increase of 26% from the first quarter of 2020. The increase in revenue was driven by organic growth from existing customers, including hardware sales, subscription fee, and processing fee. Recurring revenue increased by 30% and connected point of sale revenue by 20%. Our gross profit margin for the quarter was 46%, down from 48% for the same period last year, but aligned with historical numbers. Looking at slide 14, in terms of our operating expenses, R&D expenses for the first quarter of 2021, not including share-based expenses, $3.2 million, up from $1.9 million in the first quarter of 2020. This growth relates to our continuing investment in developing new products and verticals by recruiting more employees to support our long-term growth potential. SG&A expenses for the first quarter of 2021 were about $8.1 million, excluding share-based expenses and one-time expenses relating to the IPO. which represent about 30% growth versus Q1 2020. Most of the growth relates to an increase in headcount to support our long-term goals. Moving forward to page 15, our adjusted EBITDA was break-even in the first quarter, down from $1.1 million during the first quarter of 2020. This relates primarily to our significant investment in R&D, in human capital, as we position ourselves for long-term growth. These figures are in line with the target we set forth in the IPO, as our commitment to long-term profitability remains our top priority. At page 16, looking at page 16, our cash flow capex in the first quarter of 2021 was $2.3 million, a 28th growth from Q1 2020. A few more highlights from our financial statement. We see total liability increased by 13% compared to the end of 2020. Part of it relates to the WISMA acquisition. Our cash flow from operating activity generated $3.8 million during the third quarter of 2021, and we maintain a cash and cash equivalent balance of $13.3 million in the end of the quarter. With that, I would like to transfer the call to the operator so that Yair, David, and I can take your questions. Operator?

Sure. Thank you. We will now begin the question and answer session. To ask a question, you may press star then 1 on your telephone keypad. If you are using a speakerphone, please pick up your handset before pressing the keys. To withdraw your question, please press star then two.

At this time, we will pause momentarily to assemble our roster. And again, if you have a question, please press star then one.

This concludes our question and answer session. I would like to turn the conference back over to management for any closing remarks.

So thank you all for joining the first conference call of NIACS, and we're looking forward to see you and have some questions and remarks to support our growth. And again, thank you for all the participants. Thank you very much.

And thank you. The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.