Paysafe Limited

Greetings, and welcome to Paysafe's first quarter 2021 earnings conference call. At this time, all participants are in a listen-only mode. A question and answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. As a reminder, this conference is being recorded. I would now like to turn the conference over to your host, Will Maina. Investor Relations with Paysafe. Please go ahead.

Thank you and good morning. Welcome to the Paysafe First Quarter 2021 Earnings Conference Call. With me today are Philip McHugh, Chief Executive Officer, and Anzi Doddwood, Chief Financial Officer. Before we begin, I'd like to remind everyone that this call will contain forward-looking statements and should be considered in conjunction with cautionary statements contained in our earnings release and the company's most recent periodic SEC reports. These statements reflect management's current beliefs, assumptions, and expectations, and are subject to a number of factors that could cause actual results to differ inherently from those of overlooking statements. During today's call, management will provide certain information that will constitute non-GAAP financial measures under FTC rules. These reconciliations to GAAP measures and certain additional information were also included in today's earnings press release and supplemental earnings presentation, which are available in the Investor Relations section of our company website. I'll now turn the call over to Phillip.

Thanks, Will. Thanks for that. Well, first of all, welcome and thank you to everyone for joining our first public earnings announcement as PaySafe. Today, I'm going to cover some of the strategic highlights and key deliverables from our first quarter and then turn it over to Izzy Dawood, our CFO, to review our financial performance. To say the least, it's been an eventful and successful quarter for PaySafe. First, we successfully listed on the New York Stock Exchange on March 31st, following a successful SPAC with strong return to investors. We raised $2.1 billion and successfully de-SPACed going public 114 days after our initial announcement. We were able to pay down more than a billion dollars of debt, strengthening our balance sheet and our credit rating along the way. We also have a new board in place with Bill Foley as our chairman. And we've already started our implementation of the Fully Transformation Plan. Lots of activity on that front. As a team, we've been able to execute against our strategy, driving growth and scale across the company and delivering on our key initiatives. We're starting this new chapter with strong momentum across the business and the markets that we want to win. And from an overall market view, we continue to see lots of strong activity. Online and e-commerce volumes continue to remain strong. We're seeing rapid growth and lots of market activity in North America, iGaming, with the legalization of sports betting in four new states planned in 2021 and several other states not far behind. We're also seeing the emergence of a strong recovery in the U.S. SMB market, where in the first quarter we saw 18% increase in volumes year on year in our U.S. acquiring business, and we're seeing much higher growth in April. Finally, we're also seeing a continued adoption of and consumer openness to using new payment methods, which should serve Paysafe well over time. According to our recent proprietary research, nearly 60% of consumers have tried a new payment method in the last 12 months. Moving on to our strategy. For anyone new to Paysafe and our story, I really encourage you to review our recent Analyst Day presentation. We provided ample detail during that event back in March, which I won't repeat today, but I do think it's important to recap a few points. First, PaySafe is a scaled and truly unique payments company with our goal to be the leading specialized payment platform. What do I mean by that? We're a company with differentiated products on both the consumer and the merchant side, creating a powerful two-sided network. Moreover, our powerful Skrill, NetTeller, and PaySafe card brands provide millions of consumers valuable ways to make payments and send money in all forms of digital commerce. We match our products with strong risk management expertise that's very hard to replicate, along with scale global technology platforms that allow us to deliver payment solutions in hundreds of markets. Lastly, and very importantly, we like to approach the market focused in deep verticals like iGaming. It requires knowledge of multiple APMs, strong risk management, and ease of integration. When that combination is required, we know that PaySafe has the right to win. In terms of how we deploy that strategy, we really focus on four key growth pillars. First, we are positioned to be the true winner in high gaming, which includes online sports betting, casino and poker, fantasy, and esports. In particular, we have a strong position to win the fast-emerging U.S. high gaming markets. Second, the strength of our products, including Skrill, NetTeller, and our eCash solutions, combined with our strong e-commerce capabilities, position us well to win beyond iGaming, including digital goods, trading and financial services, travel entertainment, and some select integrated verticals. With 75% of our revenues coming from online payments and our focus in specific industry verticals, we're exposed to the fastest swim lanes of growth in the payments markets. The third pillar, which we spoke about in great detail during our analyst day, is our transformation plan, which is well underway, and we are already delivering rising operating leverage across all areas of the company. And finally, we see multiple consolidation opportunities in the market to enhance our position in North America iGaming, digital wallet expansion, and e-commerce verticals. So that's a bit of a summary of what we said during the last analyst day in terms of our strategy. So now let me move on to what we actually did in the first quarter. Let me first start with North American iGaming. At the analyst day, we talked a lot about the iGaming market and how PaySafe is the de facto payments partner of choice, serving the majority of regulated iGaming industry, with more than 1,000 gaming operators who use one or more of our products around the world. We also talked about our strategy to grow the emerging U.S. markets, where we already have integrations into approximately 75% of all operators. So let me provide some key updates on our activity in the first quarter. Revenues from North America iGaming grew 66% in the first quarter. PaySafe launched in both Michigan and Virginia in the first quarter. Now we are live in 15 states across the U.S. We also expanded and deepened our presence with a number of exciting wins during the first quarter and early second quarter. Our U.S. lottery business has enjoyed significant growth, buoyed by our expanded partnership with Jack Pocket, who recently launched in New York. In March, we expanded our U.S. partnerships with PointsBet in Michigan. We're also expanding our relationship with Parks Casinos, leveraging our Playtech integration, where we are live in Michigan with plans to expand in other states. In Virginia, we are going live with WinBet on the back of our relationship with BetBull, which is powering their business. Additionally, we also expanded our strong presence in Colorado with our launch of PlayUp. And moving on to Canada, we continue to have a dominant position, and as announced in a recent press release, we now support Alberta's only regulated online gambling website. In addition to expanding our payments integrations in multiple states, we also talked about making key product enhancements, specifically with our Skrill digital wallets. We focus on driving instant funding in the wallet where we think there's a material gap in the market. The feedback from our product from early discussions with key merchants has been very positive, and we're on track for upcoming pilots with several major brands. Overall, we're incredibly pleased with the traction here, both from an execution and a market perspective. Now let me turn to how we're growing in emerging verticals. We have seen strong growth in trading and financial services, as well as in digital goods such as online gaming. Of particular note has been the overall strength of our e-cash business growing 60% year-on-year as it expands into new markets as well as crypto trading in our Skrill wallet. In online gaming, we continue to gain traction. We're live in 20 countries with Microsoft, and we continue to expand that relationship. And our presence as an active sponsor of the eSports League continues to drive true user engagement. We've been very active in other emerging markets, particularly with making good strides across crypto and trading, supporting neobanks and other financial services. We saw strong Q1 growth in crypto and FX trading volumes within digital wallets. Of particular note, in March, we expanded our partnership with Coinbase to include the ability to trade cryptocurrencies in the U.S. market. We are live on 27 crypto sites and exchanges for digital wallets. with seven of those sites also live for processing as well, a good example of the two-sided network. In eCash, we're becoming a meaningful player supporting financial services, including partnerships with banks and neobanks. It includes the pilot with TSB and Dieboldt Nextdoor, building on some of our prior announcements, including Moniz. Additionally, we continue to see progress in integrated software and verticals with Ascend and Campminder as two recent wins. Now let me move on from the emerging verticals into the transformation proof points. We've also made progress on our transformation initiatives and the Foley playbook to accelerate global scale and unlock value. We are well on track to meet or exceed our target to migrate 70% of our business across pay safe to the cloud by year end, effectively having 100% migration by early 2022. We're seeing improvement across both risk and banking as a service. These actions are lowering our loss rates and bank fees as we improve risk analytics and partner with more tier one banks. We've also kicked off a number of initiatives to capture further cost savings across multiple functions. In Q1, our SG&A costs were down approximately 4% versus prior year, and we see a continued path to driving positive operating leverage. Now, moving on to the last pillar, we remain active in the market regarding deals, assessing potential opportunities to enhance iGaming consolidate digital wallet, and expand our e-commerce footprint. Before we move on, I'll make a quick comment on the financial results, and Izzy will take you through the details. While we are seeing growth and strong underlying trends across the businesses in all the right places, this growth has been somewhat tempered by measures to improve the overall risk-reward profile in certain markets and channels. As we mentioned during the analyst day, the majority of these actions took place in 2020, and we expect to truly lap these issues in the second half of this year. As a last point, I want to finally thank my Paysafe team members around the world. Our success to getting this moment is a true testament of the hard work and dedication from everybody. We're really pleased to have given all the employees equity in the company, really instilling an ownership culture across Paysafe as we start this new chapter as a public company. With that introduction, I'll now turn it over to Izzy.